How to Use It explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
The Cost Inflation Index (CII) is notified by the government each year and is used to adjust an asset's purchase cost for inflation when computing long-term capital gains.
How CII works
- The government notifies a CII value for each financial year
- Indexed cost = original cost × (CII of sale year ÷ CII of purchase year)
- This raises the cost base, reducing the taxable long-term gain
How to use it
Find the CII for the year you bought the asset and the year you sold it, apply the formula to get the indexed cost, and subtract it from the sale value to get the indexed long-term capital gain.
Note
Indexation applies to specified long-term assets. Refer to the latest CII notification for the exact values, as a new value is announced each year.
Frequently Asked Questions
What is the Cost Inflation Index?
A government-notified index used to adjust an asset's cost for inflation when computing LTCG.
How do I use the CII?
Indexed cost = original cost × (CII of sale year ÷ CII of purchase year).
Why does indexation help?
It increases the cost base, lowering the taxable long-term capital gain.
Where do I find the latest CII?
From the income-tax department's annual CII notification.
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