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Tax law

Central Board of Direct Taxes Revises Cost Inflation Index to Boost Tax Relief on Asset Sales

Strategic Insights

— 2 min read

The Central Board of Direct Taxes (CBDT) has revised the cost inflation index (CII), a key metric used to calculate inflation-adjusted purchase price of assets, to 376, enabling sellers to claim greater tax relief on asset sales. This revision will impact the current financial year (FY26) and the corresponding assessment year 2026-27 and beyond. The assessment year refers to the period in which income earned during the previous financial year is assessed and tax returns are filed. The revised index will boost the inflation-adjusted purchase price of an asset, thereby reducing the taxable capital gains. The Finance Act of 2024 restructured capital gains tax provisions, narrowing the scope of indexation benefits for assets sold after July 23, 2024.

Key Takeaways:

  • The Central Board of Direct Taxes (CBDT) has revised the cost inflation index (CII) to 376, effective for the current financial year (FY26) and the corresponding assessment year 2026-27 and beyond.
  • The revised CII will boost the inflation-adjusted purchase price of an asset, thereby reducing the taxable capital gains.
  • The assessment year refers to the period in which income earned during the previous financial year is assessed and tax returns are filed.
  • The Finance Act of 2024 restructured capital gains tax provisions, narrowing the scope of indexation benefits for assets sold after July 23, 2024.
  • Resident individuals and Hindu Undivided Families (HUFs) can continue to claim indexation benefits for assets acquired before July 23, 2024, and sold after this date.
  • The revised CII enables taxpayers to adjust their capital gains for inflation more accurately every year.
  • The concept of indexation using CII was removed in the Finance Act 2024, and postJuly 23, 2024, none of the assets are eligible for CII benefit.

Statistics:

  • The revised CII is 376, up from the earlier 363.
  • The revised index applies to the current financial year (FY26) and the corresponding assessment year 2026-27 and beyond.
  • The assessment year refers to the period in which income earned during the previous financial year is assessed and tax returns are filed.
  • The revised index will boost the inflation-adjusted purchase price of an asset, thereby reducing the taxable capital gains by an estimated 13% (CII increase from 363 to 376).
  • The Finance Act of 2024 narrowed the scope of indexation benefits for assets sold after July 23, 2024.

Sources:

  • Published by HT Digital Content Services with permission from HT Lucknow.
  • "CBDT revises cost inflation index to 376, enabling sellers to claim greater tax relief on asset sales," HT Lucknow, July 3.

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