Latest news with #CostInflationIndex
&w=3840&q=100)
Business Standard
03-07-2025
- Business
- Business Standard
New cost inflation hike by CBDT brings relief for property sellers: Experts
'The higher cost inflation index helps cushion sellers from rising prices, lowering their taxable gains,' say experts, making long-term property sales more tax-friendly. The Income Tax department has notified the Cost Inflation Index (CII) for the financial year 2025-26 at 376, up from 363 last year. While this may sound like a any other ordinary number, it is of great significance for taxpayers selling long-term assets, particularly real estate acquired before July 23, 2024. Here's how experts break it down. CII: A cushion against inflation 'The Cost Inflation Index (CII) of 376 is not just a number, it's a powerful mechanism to adjust the purchase price of long-term assets for inflation,' says Niyati Shah, chartered accountant and head of personal tax at 1 Finance. For property owners, the higher CII allows for a substantially increased indexed cost of acquisition, effectively lowering taxable capital gains. Shah explains, 'This is especially impactful for those selling high-value real estate and legacy assets. The higher the CII, the more it cushions sellers from inflation-led erosion of asset value and helps preserve post-tax returns.' Who can claim indexation? Post the Finance Act 2024, indexation benefits are now preserved for assets bought before July 23, 2024, and only certain taxpayers can claim them. As Pawan Kumar Agarwal, managing director of Nklusive, points out, 'Individuals and HUFs, being normal residents of India, are still eligible to claim indexation benefits, but only for land and building purchased before July 23, 2024, and held for over two years.' Assets like gold, stocks, or any other capital asset no longer qualify for indexation benefits, even if bought before this cut-off. 12.5 per cent Flat Tax vs 20 per cent with Indexation: Which is better? A key decision for taxpayers now is whether to pay 20 per cent LTCG tax with indexation or opt for a 12.5 per cent flat tax without it. Shah advises, 'Indexation meaningfully increases the cost of acquisition, especially for long-held assets. For older properties, the 20 per cent rate with indexation often results in lower effective tax.' To illustrate, she says, 'A flat bought in June 2010 for Rs 30 lakh and sold in October 2025 for Rs 1 crore would attract Rs 8.75 lakh tax without indexation. But with the latest CII of 376, the inflation-adjusted cost becomes Rs 67.5 lakh, and tax reduces to Rs 6.49 lakh, a saving of over Rs 2.25 lakh.' Experts urge computation before choosing 'Taxpayers should compute both options and choose the one with lower liability,' suggests Agarwal. 'For long-held assets, indexation remains advantageous in most cases. But for assets with modest gains, the 12.5 per cent flat rate could be more efficient.' Vivek Jalan, partner at Tax Connect Advisory Services LLP, echoes this, adding that for assets like real estate held for decades, 'indexation often wipes out the LTCG exposure entirely or reduces it significantly.' Documentation is key Experts also caution taxpayers about compliance. Abhishek Singh, director at V3 Infrasol, highlights common mistakes. 'Using the wrong CII year, ignoring improvement costs, or misreporting acquisition year can lead to higher taxes or scrutiny. Retain all original deeds, receipts for improvements, and calculate carefully.' Real estate market adapts to tax changes From a property market perspective, Manjunath HR, managing partner at Aakruthi Properties, observes, 'Many sellers rushed to offload properties before the July 2024 deadline to retain indexation benefits. But even now, understanding tax implications is critical for optimising returns, especially in premium and luxury housing segments.' Key takeaway If you own property acquired before July 23, 2024, the new CII value of 376 offers meaningful relief in computing long-term capital gains. But deciding between the old and new tax regimes isn't straightforward. As Shah summarises, 'It's not a one-size-fits-all decision. Do the math or consult a tax advisor to pick the most tax-efficient route.'
&w=3840&q=100)
Business Standard
02-07-2025
- Business
- Business Standard
CBDT sets Cost Inflation Index at 376 for FY26 for capital gains
The Central Board of Direct Taxes (CBDT) has notified the Cost Inflation Index (CII) for the financial year 2025–26 at 376, up from 363 in 2024–25. The new index will be used to calculate long-term capital gains for the assessment year 2026–27 and subsequent years. The notification will come into effect from April 1, 2026. The CII helps taxpayers adjust the purchase price of assets for inflation, thereby reducing their taxable capital gains when those assets are sold. According to Amit Maheshwari, tax partner at AKM Global, a tax and consulting firm, the revision of the CII to 376 for FY26 is an annual update that enables taxpayers to adjust their capital gains for inflation more accurately each year. 'This effectively reduces the tax liability on long-term capital assets and ensures that individuals and businesses are taxed only on real gains, not on notional appreciation due to inflation. It is a key mechanism that brings fairness and efficiency to India's capital gains tax regime. Historically, CII was used in cases of long-term capital gains for assets such as land, buildings, patents, gold, securities, etc,' said Maheshwari. Notably, the Finance Act 2024 withdrew the benefit of indexation using the CII for all assets sold after July 23, 2024. However, taxpayers selling land or buildings acquired before that date can still choose between paying tax at 12.5 per cent without indexation or 20 per cent with indexation. 'In that case, taxpayers have the option to pay tax at 12.5 per cent without indexation or 20 per cent with indexation. Hence, the revised CII of 376 is useful for taxpayers who will sell land and buildings acquired before July 23, 2024,' Maheshwari added.
Business Standard
02-07-2025
- Business
- Business Standard
Cost inflation index notified at 376 for FY26 compared to 363 in previous year
The Income Tax Department has notified the Cost Inflation Index or CII for the current financial year 2025-26 (for assessment year 2026-27). The CII for the financial year 2025-26 has been notified at 376 and will be used to compute the indexed cost of acquisition for assets sold in FY 2025-26. This new index number will take effect on April 1, 2026. The CII stood at 363 in previous year.
&w=3840&q=100)
Business Standard
02-07-2025
- Business
- Business Standard
CBDT raises cost inflation index to 376 for FY26 to ease capital gains tax
The Central Board of Direct Taxes (CBDT) has increased a key index used to adjust the purchase price of assets for inflation, allowing sellers to claim higher tax relief when they sell those assets. According to an official notification issued on July 1, the Cost Inflation Index (CII) has been raised to 376 for the financial year 2025–26, up from 363 the previous year. This index helps adjust the purchase price of assets to account for inflation, which in turn lowers the taxable capital gains on their sale. Capital gains are calculated as the difference between the sale price and the inflation-adjusted purchase price, with the cost of improvements also taken into account. The revised index will be applicable for the current financial year (FY26) and the assessment year 2026–27 onwards. The assessment year is the period when income earned in the previous financial year is assessed and tax returns are filed. The idea behind this mechanism is that long-term capital gains (LTCG) on assets like land and buildings should reflect real profits, not just gains resulting from inflation. Scope of indexation narrowed While the indexation benefit has been revised, its availability has been reduced. The Finance Act of 2024 introduced changes to the capital gains tax system as part of the government's aim to simplify tax laws. Under the new rules, indexation is largely allowed only for assets sold before 23 July 2024. However, a grandfathering provision allows resident individuals and Hindu Undivided Families (HUFs) to continue claiming indexation benefits after this date, as long as the asset was bought before July 23, 2024. In these cases, taxpayers may choose to pay LTCG tax at 20 per cent with indexation or opt for a flat 12.5 per cent rate without indexation. Impact of CBDT notification on tax-payers The CBDT move will offer limited but meaningful relief to certain taxpayers — particularly those planning to sell long-held assets like land and buildings acquired before July 23, 2024. The CII has historically been used to adjust the purchase price of assets for inflation when calculating long-term capital gains. This mechanism ensured that taxes applied only to actual gains, excluding inflation-driven increases in asset value. It was relevant for a broad set of assets including real estate, intellectual property, gold, and financial securities, according a LiveMint report quoting sources. However, the Finance Act 2024 significantly reduced the scope of indexation benefits. Since July 23, 2024, most asset classes no longer qualify for inflation adjustment using CII. Despite this change, resident individuals and Hindu Undivided Families (HUFs) selling land or buildings acquired before that cut-off date will continue to have a choice — either pay long-term capital gains tax at a flat 12.5 per cent without indexation, or opt for a 20 per cent rate with indexation. For these cases, the updated CII will still be applicable and useful in reducing the tax burden. While the increase in the index value from 363 to 376 represents a modest rise of 3.3 per cent, it still provides some cushion against inflation for applicable transactions.
News18
02-07-2025
- Business
- News18
Income Tax Dept Notifies Cost Inflation Index For FY 2025–26: What It Means For Your LTCG Tax
Last Updated: Income Tax Department has notified the Cost Inflation Index (CII) for the financial year 2025–26 Income Tax Rules for LTCG: The Income Tax Department has notified the Cost Inflation Index (CII) for the financial year 2025–26 (assessment year 2026–27). Despite recent changes in the rules for calculating long-term capital gains (LTCG), the use of CII remains applicable in certain cases for determining income tax liability. The official notification was issued on July 1, 2025. What Is the CII for FY 2025–26? The Cost Inflation Index for FY 2025–26 is 376. This number will be used to compute the indexed cost of acquisition of capital assets sold during this financial year. The updated index will be applicable from April 1, 2026, for tax filing purposes. When and Where Is CII Used? CII is used under Section 48 of the Income Tax Act, which outlines how to calculate capital gains when an asset is sold. It provides the indexation benefit, allowing taxpayers to adjust the purchase price of certain capital assets for inflation. This helps reduce the taxable portion of capital gains. Note: Indexation applies only to long-term capital gains. Source: Income Tax Notifications Which Assets Are Eligible for Indexation? With effect from July 23, 2024, indexation benefits were withdrawn for most capital assets, except house property in specific cases. If a house property was acquired on or before July 22, 2024, and sold on or after July 23, 2024, taxpayers can choose between: Old regime: LTCG taxed at 20% with indexation New regime: LTCG taxed at 12.5% without indexation Thus, for homeowners selling eligible properties in FY 2025–26, the CII is still needed to compute LTCG under the old regime. How to Calculate Inflation-Indexed Purchase Price To compute the indexed cost, use this formula: Inflation-adjusted cost = (CII in year of sale / CII in year of purchase) × Actual purchase price Example: If a house was purchased in FY 2002–03 for ₹30 lakh, and is sold in FY 2025–26: Indexed price = (376 / 105) × ₹30 lakh = ₹1,07,42,857.14 This adjusted cost is deducted from the sale value to calculate the LTCG or long-term capital loss. Stay updated with all the latest business news, including market trends, stock updates, tax, IPO, banking finance, real estate, savings and investments. Get in-depth analysis, expert opinions, and real-time updates—only on News18. Also Download the News18 App to stay updated! Location : New Delhi, India, India First Published: July 02, 2025, 14:29 IST
