Cost Inflation Index for AY 2019-20, FY 2018-19 (Detailed Explanation)

Cost Inflation Index for AY 2019-20, FY 2018-19 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.

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 YearCIIYEARCII
2001-021002012-13200
2002-031052013-14220
2003-041092014-15240
2004-051132015-16254
2005-061172016-17264
2006-071222017-18272
2007-081292018-19280
2008-09137
2009-2010148
2010-11167
2011-12184

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

Example 1: How to Calculate Indexed Cost of Acquisition Asset

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

Sold House on 01-May-2018 = Rs 75 Lakh
Indexed Cost of PropertyActual Purchase Price *  (Index in year of Sale / Index in Year of Purchase)
Rs 20 Lakh  *  (280 / 113)  =  Rs 49.55 lakhs
Sale Amount75 Lakh
Capital Gain75 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
1981-821001999-2000389
1982-831092000-01406
1983-841162001-02426
1984-851252002-03447
1985-86133
1986-871402003-04463
1987-881502004-05480
1988-891612005-06497
1989-901722006-07519
1990-911822007-08551
1991-921992008-2009582
1992-932232009-10632
1993-942442010-2011711
1994-952592011-2012785
1995-962812012-2013852
1996-973052013-2014939
1997-98331 2014-20151024
1998-99351 2015-2016 1081
2016-20171125
 2017-2018to be announced
2018-2019280

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