02-07-2025
Income Tax Dept Notifies Cost Inflation Index For FY 2025–26: What It Means For Your LTCG Tax
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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With effect from July 23, 2024, indexation benefits were withdrawn for most capital assets, except house property in specific cases.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.
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Location :
New Delhi, India, India
First Published:
July 02, 2025, 14:29 IST
