New Delhi, 2 July (IANS). The Central Board of Direct Taxes (CBDT) has increased the cost inflation index (CII) used for calculating inflation-propelled asset prices, allowing taxpayers to claim greater relief on long-term capital gains.
According to the latest notification, the CII for the financial year 2025-26 has been revised to 376, which was 363 last year.
The cost inflation index helps to adjust the purchase price of an asset to the inflation.
This adjustment reduces taxable capital gains, which is calculated as a difference between the sale price and inflation-procurement price.
High index means high adjusted cost, which in turn reduces the tax burden on vendors.
The revised index will be applicable for FY 26 and Assessment Year 2026-27, when IT returns will be filed for income earned in FY 26.
The objective behind using this method is to ensure that the capital profit tax is imposed only on the actual profit, not the benefits caused by inflation.
However, there have been changes in overall rules regarding indexation. As part of the government’s tax simplification efforts, the 2024 Finance Act introduced new rules for the capital gains tax.
Under the updated rules, the indexation benefits will be mainly available for properties sold before July 23, 2024.
For the sale after this date, a resident person and Hindu undivided family (AUF) can still claim indexation benefits, but this will only apply only when the property is earned before 23 July, 2024.
In such cases, taxpayers have been given two options. First, they can pay tax at a new flat at 12.5 percent without indexation. Second- 20 percent of long-term capital benefits with indexation can choose to pay.
However, this option is not available to non -resident Indians (NRIs), companies. They now have to follow the new flat-rate system.
-IANS
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