The Ministry of Finance, through the Central Board of Direct Taxes (CBDT), issued Notification No. 44/2024-Income-Tax on May 24, 2024, detailing the Cost Inflation Index (CII) for the financial year 2024-25 i.e. Assessment Year 2025-26. This notification was made in exercise of the powers granted by clause (v) of the Explanation to section 48 of the Income-tax Act, 1961, and introduces further amendments to the previous notification issued on June 5, 2017. Also Read: Cost Inflation Index – Meaning & Index from 1981-82 to 2024-25
Context and Purpose of Cost Inflation Index
The Cost Inflation Index is a crucial tool used in the calculation of long-term capital gains. It adjusts the purchase price of assets to account for inflation, thereby ensuring that taxpayers are taxed on their real gains rather than the nominal gains inflated by general price increases. This mechanism is embedded in the Income-tax Act, 1961, and helps maintain equity in the tax system by recognizing the eroding effect of inflation on the value of money over time.
Details of the Notification
The notification specifies that for the financial year 2024-25, the Cost Inflation Index is set at 363. This figure is an increment from the previous years, reflecting the ongoing inflationary trends in the economy. The inclusion of this new index number in the table from the original 2017 notification signifies its application for the new financial year.
The updated table from the notification now reads:
| Sl. No. | Financial Year | Cost Inflation Index |
|---|---|---|
| 24 | 2024-25 | 363 |
This addition ensures that the cost inflation index is up-to-date and relevant for calculating capital gains for the assessment year 2025-26.
Application
The notification will come into effect on April 1, 2025, and will apply to the assessment year 2025-26.
Historical Amendments
The principal notification of the Cost Inflation Index was first published on June 5, 2017, under the reference number S.O. 1790(E). Since its inception, it has undergone several amendments to reflect changing economic conditions. The last amendment before this current one was made by notification number S.O 2571(E), dated June 12, 2023.
Importance of the Cost Inflation Index
The adjustment of the Cost Inflation Index is an essential administrative function that directly affects the calculation of taxable income from capital gains. By updating the CII annually, the government ensures that the tax system remains fair and reflective of the actual economic conditions. Without such adjustments, taxpayers could face disproportionate tax liabilities on gains that are largely attributable to inflation rather than real economic growth.
Conclusion
The issuance of Notification No. 44/2024 by the CBDT marks a routine yet significant update to the Cost Inflation Index, ensuring its relevance for the financial year 2024-25. By setting the CII at 363, the government continues its practice of adjusting the index to mirror inflationary trends, thereby protecting taxpayers from inflated capital gains taxes and promoting a fair tax environment. This notification underscores the importance of regular updates to fiscal tools and mechanisms to keep pace with economic changes, thus maintaining the integrity and fairness of the tax system.
The notification reflects a continued commitment to ensuring that tax calculations remain fair and equitable, taking into account the inflationary pressures that impact the real value of money over time. This update is particularly important for taxpayers involved in the sale of long-term capital assets, as it provides a mechanism to adjust the purchase price of these assets for inflation, thereby ensuring that they are taxed only on the real gains from their investments.
By implementing this update, the Ministry of Finance and the CBDT reaffirm their dedication to a responsive and adaptive tax system that considers the economic realities faced by taxpayers. The notification is part of an ongoing effort to keep the tax framework aligned with the dynamic economic landscape, ensuring that it remains just and efficient.
Ministry of Finance
(Department of Revenue)
(Central Board of Direct Taxes)
New Delhi
Notification No. 44/2024-Income Tax Dated: 24th May, 2024
S.O. 2103(E). — In exercise of the powers conferred by clause (v) of the Explanation to section 48 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby makes the following further amendments in the notification of the Government of India, Ministry of Finance (Department of Revenue), Central Board of Direct Taxes published in the Gazette of India, Extraordinary, Part II, section 3, sub-section (ii) number S.O. 1790(E), dated the 5th June, 2017, namely: –
In the said notification, in the Table, after serial number 23 and the entries relating thereto, the following serial number and entries shall be inserted, namely: –
Table
| Sl. No. | Financial Year | Cost Inflation Index |
| (1) | (2) | (3) |
| “24 | 2024-25 | 363” |
2. This notification shall come into force with effect from the 1st day of April, 2025 and shall accordingly apply in relation to the assessment year 2025-26 and subsequent assessment years.
[F. No. 44/2024/F.No.370142/10/2024-TPL]
PANKAJ JINDAL, Jt. Secy.
Note: – The principal notification was published in the Gazette of India, Extraordinary, Part II, section 3, sub-section (ii) vide number S.O. 1790(E), dated the 5th June, 2017 and was last amended by notification number S.O 2571(E), dated the 12th June, 2023.
