Cost Inflation Index for AY 2021-22, Cost Inflation FY 2020-21

Cost Inflation Index for AY 2021-22, Cost Inflation Index for FY 2020-21 for Long Term. Capital gain is the profit you make on selling an asset. It can be stock, real estate, mutual funds, jewellery etc. If you are selling an asset after one year from the date of its purchase, the profit becomes a short term capital gain. If you are selling the asset after 36 months from the date of purchase, it becomes a long term capital gain. Hence, the government charges capital gains tax. The government charges tax on our sale of the asset and they do not wish to let go of the capital gain. Cost inflation index India is an index issued by the Central Board of Direct Taxes and the figures keep changing every financial year.

Latest News – The Central Board of Direct Taxes has notified cost inflation index for FY 2020-21 at 301 vide notification dated 12th June, 2020.

Formula

The formula for calculating the new Purchase price using  Cost of Inflation Index is as below.

Indexed Cost of Acquisition = (Cost of Acquisition * Cost of the Inflation Index (CII) for the year in which the asset was sold or transferred.)/ The cost of Inflation Index (CII) for the year in which the asset was first held by the assessee OR FY 2001-02, whichever is later.

Capital Gain = Sales Consideration – Indexed Cost of Acquisition

Indexed Cost of Acquisition = Actual Purchase Price *  (Index in year of Sale / Index in Year of Purchase)

If the property is purchased before 2001, then you need to get the Fair market value of the property in 2001 and the use that for Indexed cost. In such cases,

Indexed Cost  = Fair Market value in 2001 *  (Index in year of Sale / Base Index i.e. 100)

In the post (further below), I have explained how can you get the fair market value of the property in 2001.

New CII Index Numbers: (applicable from 2017) – Base year is now changed from 1981 to 2001

Budget 2017 has changed the base year of Indexation from 1981 to 2001.

Cost Inflation Index

Financial Year	CII	Financial Year	CII
2001-02	100	2012-13	200
2002-03	105	2013-14	220
2003-04	109	2014-15	240
2004-05	113	2015-16	254
2005-06	117	2016-17	264
2006-07	122	2017-18	272
2007-08	129	2018-19	280
2008-09	137	2019-20	289
2009-2010	148	(FY) 2020-21	301
2010-11	167
2011-12	184

As the due date for income tax is 31 July (now extended to 31st Aug), you need to make sure that the returns are file on time. From April 2018, tax rules have changed and a penalty of upto Rs 10000 will be levied if the return is not filed on time. Also, the ITR revision time limit is also changed from 2 years to 1 year

How to Calculate Indexed Cost of Acquisition Asset

Example 1: 

Purchased House on 01-Jul-2004 =  Rs 20 Lakh

Sold House on 01-May-2018 = Rs 75 Lakh

Indexed Cost of Property	Actual Purchase Price *  (Index in year of Sale / Index in Year of Purchase)
	Rs 20 Lakh  *  (280 / 113)  =  Rs 49.55 lakhs
Sale Amount	75 Lakh
Capital Gain	75 Lakh –  Rs 49.55 lakh = Rs 25.44 lakhs

Example 2: Shivani purchased a capital asset in FY 1995-1996 for Rs. 2,00,000. FMV of the capital asset on 1st April 2001 was Rs. 3,20,000. She sells the asset in FY 2016-17. What is the indexed cost of acquisition?

Here, the asset is purchased before the base year. Hence the cost of acquisition = Higher of actual cost or FMV on 1st April 2001

i.e. Cost of Acquisition = Rs. 3,20,000

CII for the year 2001-02 and 2016-17 is 100 and 264 respectively.

Indexed cost of acquisition = 3,20,000 x 264/100 = Rs. 8,44,800.

Old Cost Inflation Index Numbers:

Financial Year	Cost Inflation Index	Financial Year	Cost Inflation Index
1981-82	100	1999-2000	389
1982-83	109	2000-01	406
1983-84	116	2001-02	426
1984-85	125	2002-03	447
1985-86	133
1986-87	140	2003-04	463
1987-88	150	2004-05	480
1988-89	161	2005-06	497
1989-90	172	2006-07	519
1990-91	182	2007-08	551
1991-92	199	2008-2009	582
1992-93	223	2009-10	632
1993-94	244	2010-2011	711
1994-95	259	2011-2012	785
1995-96	281	2012-2013	852
1996-97	305	2013-2014	939
1997-98	331	2014-2015	1024
1998-99	351	2015-2016	1081
		2016-2017	1125
		2017-2018	to be announced
		2018-2019	280
		2019-2020	289