CA Sandeep Kanoi

CA Sandeep KanoiArticle discusses Meaning of Cost Inflation Index (CII) which is used for Computation of Long Term Capital Gain. Cost Inflation index are Notified by CBDT every year and till date CBDT has notified Cost Inflation Index for the Financial Year 1981-82 to Financial year 2016-17.  Cost Inflation index are used for computing indexed cost of acquisition.

What is Cost Inflation Index (CII)?

It is a measure of inflation that finds application in tax law, when computing long-term capital gains on sale of assets. Section 48 of the Income-Tax Act defines the index as what is notified by the Central Government every year, having regard to 75 per cent of average rise in the consumer price index (CPI) for urban non-manual employees for the immediately preceding previous year. Therefore, if we consider that price of a capital asset has risen in tandem with base price rise, then if one want to sell an asset and replace it, the cost allowed even after indexation will be lesser than the price payable for new asset. However, in case of many capital asset the price rise is lesser than market price and in many cases it is higher.

How does Cost Inflation Index (CII) help in capital gains computation? Capital gain, as you know, arises when the net sale consideration of a capital asset is more than the cost. Since “cost of acquisition” is historical, the concept of indexed cost allows the taxpayer to factor in the impact of inflation on cost. Consequently, a lower amount of capital gains gets to be taxed than if historical cost had been considered in the computations.

Formula for computing indexed cost is (Index for the year of sale/ Index in the year of acquisition) x cost.

For example, if a property purchased in 1991-92 for Rs 20 lakh were to be sold  in A.Y. 2009 -10 for Rs 80 lakh, indexed cost = (582/199) x 20 = Rs 58.49 lakh. And the long-term capital gains would be Rs 21.51, that is Rs 80 lakh minus Rs 58.49 lakh.

Cost Inflation Index:- Cost inflation index (CII) as notified by Central Government alongwith analysis of the same is as under:

Cost Inflation Index  As Applicable  From  Financial Year 1981-82 To Financial Year  2016-17

FINANCIAL YEAR COST INFLATION INDEX Increase in CII and 75% of percentage of real inflation allowed Real inflation % of CII Increase allowed / 3 X 4
1981-1982 100
1982-1983 109 9 = 9% 12%
1983-1984 116 7= 6.422 8.56%
1984-1985 125 9=7.7586 10.34%
1985-1986 133 8=6.4 8.53%
1986-1987 140 7=5.263 7.02%
1987-1988 150 10=7.1428% 9.52%
1988-1989 161 11=7.333% 9.78%
1989-1990 172 11=6.8323% 9.11%
1990-1991 182 10=5.8139% 7.75%
1991-1992 199 17=9.340% 12.45%
1992-1993 223 24=12.060% 16.08%
1993-1994 244 21=9.4170% 12.56%
1994-1995 259 15=6.1475% 8.20%
1995-1996 281 22=8.494% 11.33%
1996-1997 305 24=8.5409% 11.39%
1997-1998 331 26=7.8549% 10.47%
1998-1999 351 20=6.0423% 8.06%
1999-2000 389 38=10.826% 14.44%
2000-2001 406 17=4.370% 5.83%
2001-2002 426 20=4.926% 6.57%
2002-2003 447 21=4.93% 6.57%
2003-2004 463 16=3.58% 4.77%
2004-2005 480 17=3.67% 4.90%
2005-2006 497 17=3.54% 4.72%
2006-2007 519 22=4.43% 5.90%
2007-2008 551 32=6.17% 8.22%
2008-2009 582 31=5.62% 7.50%
2009-2010 632 50=8.60% 11.46%
2010-2011 711 79=12.36% 16.49%
2011-2012 785 74=10.41% 13.88%
2012-2013 852 67 = 8.54% 11.38%
2013-2014 939 87 =10.21% 13.62%
2014-2015 1024 85 = 9.05% 12.07%
2015-2016 1081 57 = 5.57% 7.42%
2016-2017 1125 44 = 4.07% 5.43%
ON OR AFTER 01.04.2017

In order to revise the base year for computation of capital gains, section 55 of the Income Tax Act, 1961 was amended vide Finance Act, 2017 so as to provide that the cost of acquisition of an asset acquired before 01.04.2001 shall be allowed to be taken as fair market value as on 1st April, 2001 and the cost of improvement shall include only those capital expenses which are incurred after 01.04.2001.  Cost inflation index for Long Term Capital Assets sold after 01.04.2017  as notified by CBDT Notification No. 44/2017 dated 05.06.2017

TABLE
SI. No. Financial Year Cost Inflation Index
(1) (2) (3)
1 2001-02 100
2 2002-03 105
3 2003-04 109
4 2004-05 113
5 2005-06 117
6 2006-07 122
7 2007-08 129
8 2008-09 137
9 2009-10 148
10 2010-11 167
11 2011-12 184
12 2012-13 200
13 2013-14 220
14 2014-15 240
15 2015-16 254
16 2016-17 264
17 2017-18 272

Last Updated on 07.06.2017

Author Bio

More Under Income Tax

Posted Under

Category : Income Tax (27930)
Type : Articles (17631) Featured (4025)
Tags : CA Sandeep Kanoi (276) Capital Gain (410) income tax act (510) indexation (32) Inflation (146) inflation index (25) section 48 (19) tax (194)

186 responses to “Cost Inflation Index – Meaning & Index from 1981-82 to 2017-18”

  1. LAKHMI CHAND TEWANI says:

    If reconstruction takes place in 2012 after demolishing old structure build in 1985, can the value of old structure, after deducting depreciation, be claimed for arriving at Fair Value as on 01.04.01 for calculating LTCG for sale in 17-18. Completion of construction being March 14.

  2. GANGADHARAN KT says:

    PLEASE HELP TO EVALUATE A RESIDENTIAL BUILDING CONSTRUCTED IN 1981 BY CII OR ANY OTHER METHOD.

  3. GANGADHARAN KT says:

    Sir,
    Please explain how to arrive the construction cost of a residential building constructed in 1981 using Inflation Index (CII) if possible, or Pls explain the valuation method to arrive the cost of construction of such a building.

  4. vswami says:

    OFFHAND

    The subject Notification seems to be faulty in two respects:
    (A) The Index for FY 2016-17 has been fixed much before the year end of Mar 31; which is not in accordance with the basis sec 48 provides.
    (B) The base year has been changed from 1981 to 2001, but the old Index for 1981 been left untouched. So much so, property acquired before 1981 , if now sold, will, it appears, be denied the tax benefit on an amount equal to the Index for 1981.
    Any scope for a different / better perception on the foregoing observations ?

  5. vswami says:

    OFFHAND
    The Notification has prescribed the Index for FY 2016-17, prematurely, much before the year end of Mar 31, 2017 itself; unlike , as in the past, much after the end of a previous year. It is unclear, rather questionable, – how then the Index so fixed for FY 2016-17 could be claimed to have been computed strictly as per sec 48 ?

  6. MOHIT says:

    I have puchase a plot of 126 yard ( approx Registered amount Rs 150000/-) in year 2000 and constructed 2 storey over it in year 2000( ground floor) and 2005( 1st floor). Please suggest at what price we have to calculate the construction cost in year 2017 if we sale this house so that no income tax is liable on me.

    • Meenu Mahajan says:

      We bought a plot in 1970 and then constructed 2 storey. Area 900 sq.ft. The ground floor constructed in 1975 and 1st floor constructed in 1990-91. Sold in 2017. How to calculate the capital gain

  7. veeresh bangarshettar says:

    I am selling the commercial open land of 1500sqft.which I got from my grandfather purchased in 1978,40,000sqft for approximately 10000/now I want to purchase agricultural land in rural areas, what will be the capital gain tax that I have to pay.

  8. satish says:

    Cii applied on commercial property

  9. satish says:

    Cii applied on sale of commercial property

  10. S.chandrasekar says:

    My father bought a land for rs.26000/(2acre) Now it worth five crore.If I construct flats what will be the capital gains tax I have to pay? Whether it is single payment or one has to pay at the time of selling each apartment.land year of purchase 1979 and year of sale will be 2016.

  11. Gurpreet singh says:

    Sir casin sold a piece agricultural land situated within 8km form municipal limit to a ltd developer in Chandigarh @41200000/acre with a unregistered sale agreement in DEC 2013 & received all the amount in July 2015 and handedhandedover the possession to dedeveloper.can he claim the capital gain tax

  12. srinath says:

    Dear sir,

    What will be cost inflation index for the year 1974-75? How will the capital gains tax liability will be calculated if a property bought in 1974 is sold in 2014?

  13. Vijayalakshmi says:

    Already I Purchased land 2011-12 But not accounted income tax filing. If possible to account it now or in this financial year.

Leave a Reply

Your email address will not be published. Required fields are marked *