Complete Understanding of Cost Inflation Index (CII)


(Last Updated On: January 15, 2019)
CII or Cost Inflation Index refers to the numbers issued by the Income Tax Department in each year’s budget depicting the level of inflation for the relevant Financial Year. These indexes are of high importance due to change in the value of assets which were purchased in previous years but sold now. Say, we purchased a house for Rs 20,00,000 and we are selling it today for 30,00,000. So, our profit, in this case, is Rs 10,00,000. But, don’t you find it a bit inappropriate because due to the highly increased rate of inflation our house which was then purchased for Rs 20,00,000 must be of higher value currently. What is this higher value?? I would say it is Rs 22,00,000 you might say it to be 25,00,000 and somebody might quote some other value. To solve out these ambiguities Income Tax department came out with the Cost Inflation Index. CII is issued for every financial year in the Budget. One calendar year (i.e. the year 2001 currently) being the base year. To give effect to appreciation in the value of an asset due to inflation following calculation needs to be done Calculation of Indexed Cost
Particulars Amount
Value of Asset* for the year of purchase x CII for year of sale    _______________________________________________________________   CII for year of purchase** xxx
*(if the asset was purchased before base year i.e. 2001 take Fair Market Value as on the year 2001)
**(if the asset was purchased before base year i.e. 2001 take CII for the year 2001-02)
Indexed cost is the amount so calculated after taking into consideration the effect of Cost Inflation Index on the value of an asset as done above. Indexed cost can be calculated for the purpose of capital gains on the sale of property under the Income Tax Act for
    • Acquisition and
 
  • Improvement
Cost of Acquisition is the inflated purchase price and cost of the improvement is the indexed cost of expenses incurred on such property like construction etc. The government has issued Cost Inflation Index for the Financial Year 2018-19 at 280 vide its Notification dt 5/06/2017. The Current Cost Inflation Index Table-

Cost Inflation Index Chart

S No Assessment Year Financial Year Cost Inflation Index
1 2019-20 2018-19 280
2 2018-19 2017-18 272
3 2017-18 2016-17 264
4 2016-17 2015-16 254
5 2015-16 2014-15 240
6 2014-15 2013-14 220
7 2013-14 2012-13 200
8 2012-13 2011-12 184
9 2011-12 2010-11 167
10 2010-11 2009-10 148
11 2009-10 2008-09 137
12 2008-09 2007-08 129
13 2007-08 2006-07 122
14 2006-07 2005-06 117
15 2005-06 2004-05 113
16 2004-05 2003-04 109
17 2003-04 2002-03 105
18 2002-03 2001-02 & before 2001 100
Previous to budget 2017 the year 1981 was taken as the base year and the Cost Inflation Index as prescribed by the Income Tax Department were
S.No Assessment Year Financial Year Cost Inflation Index
1 1982-83 1981-82 & Before 1981 100
2 1983-84 1982-83 109
3 1984-85 1983-84 116
4 1985-86 1984-85 125
5 1986-87 1985-86 133
6 1987-88 1986-87 140
7 1988-89 1987-88 150
8 1989-90 1988-89 161
9 1990-91 1989-90 172
10 1991-92 1990-91 182
11 1992-93 1991-92 199
12 1993-94 1992-93 223
13 1994-95 1993-94 244
14 1995-96 1994-95 259
15 1996-97 1995-96 281
16 1997-98 1996-97 305
17 1998-99 1997-98 331
18 1999-00 1998-99 351
19 2000-01 1999-00 389
20 2001-02 2000-01 406
21 2002-03 2001-02 426
22 2003-04 2002-03 447
23 2004-05 2003-04 463
24 2005-06 2004-05 480
25 2006-07 2005-06 497
26 2007-08 2006-07 519
27 2008-09 2007-08 551
28 2009-10 2008-09 582
29 2010-11 2009-10 632
30 2011-12 2010-11 711
31 2012-13 2011-12 785
32 2013-14 2012-13 852
33 2014-15 2013-14 939
34 2015-16 2014-15 1024
35 2016-17 2015-16 1081
36 2017-18 2016-17 1125
Also, to facilitate users and provide ease in knowing the CII applicable to the transaction the Income Tax Department has given on its official website the utility to know CII applicable https://www.incometaxindia.gov.in/Pages/utilities/Cost-Inflation-Index.aspx To file your ITR in a seamless manner and take maximum benefit of income tax provisions Contact Us Now!!

Author


Team Tax2Win