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

Cost of Inflation Index

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 Year CII 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
2009-2010 148
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

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 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

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