Cost of Inflation Index (CII) from FY 2001-02 to FY 2023-24 for LTCG Indexation Calculation

What is the Cost of Inflation Index (CII) from FY 2001-02 to FY 2023-24 in India?

The latest Cost Inflation Index (CII) for the Financial Year FY 2024-24 and Accounting Year (AY 2024-25) has been declared and is 348. More details here.

The CII is used to notify the rate of inflation for indexation purposes in India every financial year. And for this current CIIC series, the base year has been considered as 2001-02 (Do note that in the Union Budget of 2017, the base year for CII had been shifted from 1981 to 2001).

But for what is this latest CII number used?

It is used to do all the Indexation calculations for the Capital Gains coming from gains received/accrued from various capital assets. So CII number helps to calculate the Inflation-adjusted Purchasing Price of an Asset. This is what is known as the Indexed Cost of Acquisition).

Historical Cost Inflation Index (CII) from FY2001-02 to FY2023-24 (CII Chart Updated)

If you wish to know how the Cost Inflation Index numbers have moved up since the Base Year of 2001, then have a look at the complete list of Cost of Inflation Index from FY2001-02 to FY2022-23 for capital gains calculation below:

• Financial Year 2001-02: CII Number is 100 (for the Base Year)
• Financial Year 2002-03: CII Number is 105
• Financial Year 2003-04: CII Number is 109
• Financial Year 2004-05: CII Number is 113
• Financial Year 2005-06: CII Number is 117
• Financial Year 2006-07: CII Number is 122
• Financial Year 2007-08: CII Number is 129
• Financial Year 2008-09: CII Number is 137
• Financial Year 2009-10: CII Number is 148
• Financial Year 2010-11: CII Number is 167
• Financial Year 2011-12: CII Number is 184
• Financial Year 2012-13: CII Number is 200
• Financial Year 2013-14: CII Number is 220
• Financial Year 2014-15: CII Number is 240
• Financial Year 2015-16: CII Number is 254
• Financial Year 2016-17: CII Number is 264
• Financial Year 2017-18: CII Number is 272
• Financial Year 2018-19: CII Number is 280
• Financial Year 2019-20: CII Number is 289
• Financial Year 2020-21: CII Number is 301
• Financial Year 2021-22: CII Number is 317
• Financial Year 2022-23: CII Number is 331
• Financial Year 2023-24: CII Number is 348

(You can also use this link to check these rates)

So this is the New Series of Cost Inflation Index (CII) From FY 2001-02 to FY 2023-24.

You can use these CII figures to calculate the adjusted or indexed cost of acquisition which is required for the calculation of long-term capital gains (LTCG) or Long Term Capital Losses (LTCL).

The Cost of Inflation Index Chart for FY 2023-24 is 348. But how is this CII figure actually used to calculated the indexed costs?

Let’s have a look below:

How to calculate Indexed Cost of Purchase or Indexed Cost of Acquisition (ICoA)?

Let’s say you invested Rs 5 lakh in a good debt fund in June 2015. After 4 years, i.e. in June 2019, the value of your investment has become Rs 7 lakh. Assume you sell it at this point.

So mathematically speaking, you made capital gains of Rs 2 lakh. But this gain was made after a period of 4 years, which is more than 3 years requirement for capital gains qualifying as Long Term Capital Gains.

So do you pay tax on this full Rs 2 lakh gain?

No?

Because as per the latest taxation rules of mutual funds, the Long Term Capital Gains on Debt Mutual Funds are taxed at 20% after indexation.

So this means, you need to adjust the cost of acquisition for indexation. And for that, the following numbers are known:

• Cost of acquisition = Rs 5 lakh
• CII number for 2015-16, the year of purchase = 254
• CII number for 2019-20, the year of sale = 289.

So the indexed cost price of the acquisition is calculated using the formula:

Indexed Cost = Actual Cost * (CII of Sale Year / CII of Purchase Year)

And in our example, this comes out as follows:

= Rs 5 lac * (289/254) = Rs 5,68,897

And this means that the long term capital gains are calculated as follows:

= Rs 7,00,000 – Rs 5,68,897 = Rs 1,31,103 (Rs 1.31 lakh)

So you get taxed at 20% on this amount of Rs 1.31 lakh (instead of Rs 2 lakh without indexation). And this translates to:

LTCG tax of 20% on Rs 1.31 lakh, i.e. Rs 26,220.

Had it not been for indexation benefit, your tax would have been 20% on the full actual profit of Rs 2 lakh: 20% of Rs 2 lakh = Rs 40,000.

(The above example uses the CII Number for 2019-20 which is 289. The latest rate for CII 2022-23 is 331 now).

So indexation helps reduce your tax obligations.

To sum it up as a reminder, the CII number is used to compute the inflation-adjusted purchase cost of an asset in order to calculate LTCG on it when it is sold. This reduces the tax as the adjusted cost (which is higher) and not the actual cost is taken to calculate the capital gains.

This CII number is important as it will be used to compute inflation-adjusted long-term capital gains (LTCG) on assets such as houses, gold, debt mutual funds (MF) etc. And it goes without saying that you can use the CII number to calculate inflation-adjusted cost only for those assets where inflation-adjusted (indexation benefit) is allowed. For example – the LTCG arising from equity shares and equity mutual funds is not eligible for indexation benefit.

As per the latest notification by the government for the Cost Inflation Index (CII) for FY 2022-23. The CII Number for FY 2022-23 (AY 2023-24) is 331. While for the previous year, the Cost Inflation Index (CII) for FY 2021-22 and the CII Number for FY 2021-22 (AY 2022-23) was 317.

Let’s take another example of the use of Indexation for adjusting the Cost Price of another asset which is favourite of millions of Indians: Real Estate.

Suppose you like to invest in real estate and purchased a house in 2008-09 for Rs 25 lakh. And since you were making good profits on this investment, you sold it in FY 2018-19 for Rs 52 lakh.

The inflation-adjusted cost and LTCG on it will be calculated as follows:

Inflation-adjusted cost: (280/137) * 25 lakh = 51.09 lac

LTCG: Rs 52 lakh – Rs 51.09 lakh = Rs 91,000 (Approx.)

Cool Right?

Instead of paying a tax of Rs 5.4 lakh on the actual Rs 27 lakh gain, you only pay 20% on the notional gain of Rs 91,000 – which is Rs 18,200.

Indexation can dramatically reduce your tax outgo.

And I am sure you would have realized by now that the effects of indexation benefit are more pronounced when the inflation is high.

I know what you are thinking – indexation is such a beneficial concept as it reduces your tax outgoes substantially. But why is it that the government offers such a benefit in the first place…

Why is Cost Inflation Index (CII) calculated in India?

The answer is pretty simple. You already know inflation is always there (practically speaking). That the cost of things keeps rising. The Cost Inflation Index is calculated to adjust and match the prices to the inflation rate, and more importantly for calculating the estimated increase in the prices of goods and assets year-by-year due to inflation.

So once the growth in prices due to inflation is known, the actual residual growth can be considered as real capital appreciation and taxed.

For example – Let’s say you buy a product for Rs 1000. And you sell it for Rs 2500 in 5th year. Now your gain is Rs 1500. But due to inflation, the cost of that product itself would have grown. Right? And this is captured by updates in CII. So if CII at the time of purchase was 100 and in the year of sale was 175, then that means that the growth in price from Rs 1000 to Rs 2500 has two parts:

• Due to inflation = (160/100)*1000 = 1600 – 1000 = Rs 600
• Actual Growth = Rs 1500 – Rs 600 = Rs 900

In combination, the growth due to inflation (Rs 600) and that due to actual growth (Rs 900), take the price of the product from Rs 1000 to Rs 2500 in 5 years.

So you only get taxed for the actual growth of Rs 900. And that is the reason for having this concept in the first place.

And to pass on the benefit of this concept to the taxpayers, the cost inflation index benefit is applied to the long-term capital assets, due to which purchase cost increases, resulting in lesser profits (actual in-hand profits still remain the same) and lesser taxes.

I told you that the base year for CII was changed. But why was this done?

Why Change Base year for Capital Gain Indexation from 1981 to 2001?

In Budget 2017, the Finance Minister announced the shifting of the base year of the Cost Inflation Index from 1981 to 2001. So up to 31^st March 2017, the capital gain was calculated with 1981 as the base year. However, from 1st April 2017 onwards, the purchase price will be calculated based on the fair market value in the year 2001.

And this was done to address the problems faced by taxpayers in calculating capital gains tax payable on assets (mainly real estate and properties) acquired on or before 1981. The tax authorities too were finding it difficult to rely on the valuation reports alone.

So the government decided to shift the base year to 2001 so that the asset valuations can be done quickly and accurately. And for assets (eligible for indexation) purchased before 1st April 2001, the taxpayers are allowed to take the higher actual cost or Fair Market Value as on 1st April 2001 as the purchase price and accordingly, avail the indexation benefit.

That was the reason for changing the base year of CII from 1981 to 2001. By the way, if you are curious to know what the Old CII Series from the base year 1981 onwards was, then let me list it for you:

• Old CII Series (Base Year 1981-82): Financial Year 1981:82: CII 100
• Old CII Series (Base Year 1981-82): Financial Year 1982:83: CII 109
• Old CII Series (Base Year 1981-82): Financial Year 1983:84: CII 116
• Old CII Series (Base Year 1981-82): Financial Year 1984:85: CII 125
• Old CII Series (Base Year 1981-82): Financial Year 1985:86: CII 133
• Old CII Series (Base Year 1981-82): Financial Year 1986:87: CII 140
• Old CII Series (Base Year 1981-82): Financial Year 1987:88: CII 150
• Old CII Series (Base Year 1981-82): Financial Year 1988:89: CII 161
• Old CII Series (Base Year 1981-82): Financial Year 1989:90: CII 172
• Old CII Series (Base Year 1981-82): Financial Year 1990:91: CII 182
• Old CII Series (Base Year 1981-82): Financial Year 1991:92: CII 199
• Old CII Series (Base Year 1981-82): Financial Year 1992:93: CII 223
• Old CII Series (Base Year 1981-82): Financial Year 1993:94: CII 244
• Old CII Series (Base Year 1981-82): Financial Year 1994:95: CII 259
• Old CII Series (Base Year 1981-82): Financial Year 1995:96: CII 281
• Old CII Series (Base Year 1981-82): Financial Year 1996:97: CII 305
• Old CII Series (Base Year 1981-82): Financial Year 1997:98: CII 331
• Old CII Series (Base Year 1981-82): Financial Year 1998:99: CII 351
• Old CII Series (Base Year 1981-82): Financial Year 1999:00: CII 389
• Old CII Series (Base Year 1981-82): Financial Year 2000:01: CII 406
• Old CII Series (Base Year 1981-82): Financial Year 2001:02: CII 426
• Old CII Series (Base Year 1981-82): Financial Year 2002:03: CII 447
• Old CII Series (Base Year 1981-82): Financial Year 2003:04: CII 463
• Old CII Series (Base Year 1981-82): Financial Year 2004:05: CII 480
• Old CII Series (Base Year 1981-82): Financial Year 2005:06: CII 497
• Old CII Series (Base Year 1981-82): Financial Year 2006:07: CII 519
• Old CII Series (Base Year 1981-82): Financial Year 2007:08: CII 551
• Old CII Series (Base Year 1981-82): Financial Year 2008:09: CII 582
• Old CII Series (Base Year 1981-82): Financial Year 2009:10: CII 632
• Old CII Series (Base Year 1981-82): Financial Year 2010:11: CII 711
• Old CII Series (Base Year 1981-82): Financial Year 2011:12: CII 785
• Old CII Series (Base Year 1981-82): Financial Year 2012:13: CII 852
• Old CII Series (Base Year 1981-82): Financial Year 2013:14: CII 939
• Old CII Series (Base Year 1981-82): Financial Year 2014:15: CII 1024
• Old CII Series (Base Year 1981-82): Financial Year 2015:16: CII 1081
• Old CII Series (Base Year 1981-82): Financial Year 2016:17: CII 1125

Just a reminder that the above series is the Old one. The New CII Series has the base year of 2001 and is detailed earlier in the post.

And that is how the Cost Inflation Index (CII) helps bring down your tax liability on LTCG considerably: by adjusting the purchase/investment amount against the CII value of the relevant financial years of purchase and sale.

If you are a mutual fund investor, then the Cost Inflation Index can help lower your tax obligations as well (as seen in the first example).

Within the mutual fund space, Debt mutual funds are increasingly becoming popular among investors looking for an alternative to bank fixed deposits.

And due to the availability of indexation benefit for capital gains on debt funds, increasingly the debt funds are gaining over fixed deposits as the impact of tax on debt funds (after 3 years) is much less than when compared to bank FDs which are taxed as per the individual’s marginal tax slab (read more about Fixed deposit interest taxation).

So hopefully, you are now clear about how indexation benefit is derived from the Cost Inflation Index (CII) to calculate the LTCG tax on debt funds and other capital assets in India.

The latest CII number is 348 for FY 2023-24 in India and the CII number is 331 for FY 2022-23 in India.