Key Takeaways
- The Cost Inflation Index (CII) for FY 2025-26 is 376, notified by CBDT via Notification No. 70/2025 dated 1 July 2025.
- CII adjusts the purchase price of long-term capital assets for inflation, reducing taxable capital gains on sale.
- Indexed Cost of Acquisition = (Original Cost x CII of year of sale) / (CII of year of purchase or FY 2001-02, whichever is later).
- Post-Budget 2024 (from 23 July 2024), LTCG on all assets is taxed at 12.5% without indexation. However, resident individuals and HUFs selling land or building acquired before 23 July 2024 can choose the lower of 12.5% without indexation or 20% with indexation.
What is the Cost Inflation Index for FY 2025-26? The CBDT has notified the Cost Inflation Index for FY 2025-26 (AY 2026-27) as 376 via Notification No. 70/2025 dated 1 July 2025. CII is notified under Section 48, Explanation (V) of the Income Tax Act, 1961. The base year is FY 2001-02 (CII = 100). CII for FY 2026-27 (AY 2027-28) has not been notified yet as of June 2026.
What Is Cost Inflation Index (CII)?
The Cost Inflation Index is a number published every year by the Central Board of Direct Taxes (CBDT) under Section 48 of the Income Tax Act, 1961. It measures how much prices have risen since the base year FY 2001-02.
When you sell a long-term capital asset (property, gold, unlisted shares, debt mutual funds), you pay tax on the profit. Without CII, your entire nominal gain would be taxable, including the portion that simply reflects inflation. CII lets you adjust your purchase price upward to account for inflation, so you pay tax only on the real gain.
How CBDT computes CII each year: The index equals 75% of the average rise in the Consumer Price Index for Urban India (CPI-Urban) for the immediately preceding financial year (Section 48, Explanation (V), Income Tax Act, 1961). This means the government uses three-quarters of actual urban inflation, not the full figure.
Complete CII Table: FY 2001-02 to FY 2025-26
The base year is FY 2001-02 with CII = 100. All subsequent values are relative to this base.
| Financial Year | CII Value | Financial Year | CII Value |
|---|---|---|---|
| 2001-02 (Base Year) | 100 | 2014-15 | 240 |
| 2002-03 | 105 | 2015-16 | 254 |
| 2003-04 | 109 | 2016-17 | 264 |
| 2004-05 | 113 | 2017-18 | 272 |
| 2005-06 | 117 | 2018-19 | 280 |
| 2006-07 | 122 | 2019-20 | 289 |
| 2007-08 | 129 | 2020-21 | 301 |
| 2008-09 | 137 | 2021-22 | 317 |
| 2009-10 | 148 | 2022-23 | 331 |
| 2010-11 | 167 | 2023-24 | 348 |
| 2011-12 | 184 | 2024-25 | 363 |
| 2012-13 | 200 | 2025-26 | 376 |
| 2013-14 | 220 |
(Source: CBDT notifications under Section 48, Explanation (V), Income Tax Act, 1961. FY 2025-26 value from Notification No. 70/2025.)
Note: CII for FY 2026-27 (AY 2027-28) has not been notified yet. CBDT typically publishes it between May and July each year. This page will be updated once the notification is issued.
How to Calculate Indexed Cost of Acquisition
The formula for computing the indexed cost of acquisition is straightforward:
Indexed Cost of Acquisition = (Cost of Acquisition x CII of year of transfer) / (CII of year of acquisition or FY 2001-02, whichever is later)
If you also spent money on improvements, the indexed cost of improvement is calculated separately using the CII of the year of improvement.
Worked Example: Property Sale
Facts: Mr. Sharma bought a plot of land in April 2010 (FY 2010-11) for Rs 25,00,000. He sells it in January 2026 (FY 2025-26) for Rs 85,00,000.
Step 1: Identify the CII values.
- CII for FY 2010-11 (year of acquisition): 167
- CII for FY 2025-26 (year of transfer): 376
Step 2: Compute indexed cost of acquisition.
- Indexed Cost = (25,00,000 x 376) / 167 = Rs 56,28,743 (rounded)
Step 3: Compute long-term capital gain.
- Sale price: Rs 85,00,000
- Indexed cost: Rs 56,28,743
- LTCG with indexation = Rs 28,71,257
Step 4 (without indexation):
- Sale price: Rs 85,00,000
- Original cost: Rs 25,00,000
- LTCG without indexation = Rs 60,00,000
The difference is significant. With indexation, the taxable gain drops from Rs 60 lakh to Rs 28.71 lakh. Whether Mr. Sharma can use indexation depends on the Budget 2024 rules explained below.
Worked Example: Gold Jewellery
Facts: Mrs. Patel inherited gold jewellery in March 2005 (FY 2004-05). The fair market value on the date of inheritance was Rs 5,00,000. She sells it in December 2025 (FY 2025-26) for Rs 28,00,000.
Step 1: CII values.
- CII for FY 2004-05: 113
- CII for FY 2025-26: 376
Step 2: Indexed cost = (5,00,000 x 376) / 113 = Rs 16,63,717 (rounded)
Step 3: LTCG with indexation = 28,00,000 - 16,63,717 = Rs 11,36,283
Without indexation: LTCG = 28,00,000 - 5,00,000 = Rs 23,00,000
Budget 2024 Changed Indexation Rules: What Applies Now
The Finance (No. 2) Act, 2024, effective from 23 July 2024, made a fundamental change to how long-term capital gains are taxed.
The New Default Rule (from 23 July 2024)
All long-term capital gains under Section 112 are now taxed at a flat 12.5% without indexation. This replaces the earlier rule of 20% with indexation. The change applies to all non-equity long-term assets: property, gold, unlisted shares, debt instruments, and bonds.
The Grandfathering Exception: Land and Building
For resident individuals and Hindu Undivided Families (HUFs) who sell land, building, or both that was acquired before 23 July 2024, there is a choice. The taxpayer can compute tax both ways and pay the lower amount:
- Option A: 12.5% on LTCG computed without indexation, OR
- Option B: 20% on LTCG computed with indexation (using the CII table)
Whichever option produces the lower tax liability applies.
(Source: Second proviso to Section 112(1), Finance (No. 2) Act, 2024; CBDT FAQs on new capital gains regime, PIB dated 6 August 2024.)
Who Gets the Choice and Who Does Not
| Category | Indexation Choice Available? |
|---|---|
| Resident individual selling pre-23 July 2024 property | Yes |
| Resident HUF selling pre-23 July 2024 property | Yes |
| NRI selling pre-23 July 2024 property | No (12.5% flat rate only) |
| Company or firm selling pre-23 July 2024 property | No (12.5% flat rate only) |
| Anyone selling property acquired on or after 23 July 2024 | No (12.5% flat rate only) |
| Anyone selling gold, unlisted shares, or debt MFs | No (12.5% flat rate, regardless of acquisition date) |
Applying the Choice: Continuing Mr. Sharma's Example
Mr. Sharma is a resident individual. His plot was bought in April 2010 (before 23 July 2024). He qualifies for the grandfathering choice.
- Option A (12.5% without indexation): Tax = 12.5% of Rs 60,00,000 = Rs 7,50,000
- Option B (20% with indexation): Tax = 20% of Rs 28,71,257 = Rs 5,74,251
Option B is lower. Mr. Sharma pays Rs 5,74,251 in LTCG tax using the indexation benefit. This saves him Rs 1,75,749 compared to the flat-rate option.
When does Option A win? If the property was bought recently (say 2020 or later) and has appreciated sharply, the indexed cost may not reduce the gain enough to offset the higher 20% rate. Always compute both before choosing.
Assets Acquired Before FY 2001-02
If you purchased a capital asset before 1 April 2001, you cannot use the original purchase price for indexation. Instead, you must use the fair market value (FMV) of the asset as on 1 April 2001 as your cost of acquisition. The CII of the base year (FY 2001-02 = 100) becomes the denominator in the indexation formula.
For immovable property, this FMV is typically determined by the stamp duty value as on 1 April 2001, or a valuation by a registered valuer.
Common Mistakes to Avoid
1. Using the wrong CII year. The CII for the year of transfer is the financial year in which the sale deed is executed, not the year you received the sale proceeds. Similarly, the year of acquisition is the FY in which you acquired the asset, not the registration date if it differs.
2. Forgetting that the base year is 2001-02, not 1981. The base year was shifted from FY 1981-82 to FY 2001-02 by the Finance Act 2017. If you are computing gains on an asset bought before 2001, use the FMV as on 1 April 2001 and CII 100 as the base. Old CII values (prior to 2001-02) are no longer relevant for indexation.
3. Applying indexation when the new 12.5% rate applies. If you sold an asset after 23 July 2024 and you are not a resident individual or HUF selling pre-23 July 2024 land or building, you cannot use indexation. The 12.5% flat rate without indexation is the only option.
4. Mixing up FY and AY. CII 376 is for FY 2025-26. If you sold an asset in FY 2025-26, you use CII 376. The corresponding assessment year is AY 2026-27, which is when you file your ITR, not the CII reference year.
How Tax Garden Helps
Computing indexed cost of acquisition, choosing between 12.5% and 20% rates, and correctly filling Schedule CG in ITR-2 or ITR-3 requires precision. One wrong CII value changes the entire tax liability. Tax Garden handles the computation end to end: we verify the acquisition date, apply the correct CII, compute both options where the grandfathering rule applies, and file the return with accurate capital gains. See our tax compliance plans.