Cost inflation index number for FY 2023-24 (AY 2024-25) used for LTCG calculation notified by CBDT

The Central Board of Direct Taxes (CBDT) has notified the cost inflation index (CII) number for the current financial year 2023-24. As per the notification dated April 10, 2023, the CII number for the current fiscal is 348. This CII number will be used to calculate the capital gains accrued in the current financial year from the sale of long-term assets. The CII number is used to calculate the indexed or inflation adjusted cost on a long-term asset in order to calculate the capital gains. Once the capital gains are calculated, then income tax payable on such gains is calculated. You will need this CII number at the time of filing income tax return (ITR) next year i.e., AY 2024-25.

The CII number for the previous year i.e., for FY 2022-23 was 331.

When is the cost inflation index number used?

The cost inflation index number is used to adjust the purchase price of assets on the basis of inflation. The CII number helps an individual to ascertain the inflation-adjusted current price of an asset. This in turn helps in calculating capital gains from the sale of those assets after taking inflation into account.

CII number is used to calculate the long-term capital gains when a house, land or building is sold by an individual. Till FY 2022-23 (ended on March 31, 2023), the CII number was used to calculate the long-term capital gains from non-equity mutual fund schemes. These are debt mutual fund schemes, international equity mutual fund schemes, gold mutual fund schemes etc. However, from FY 2023-24, the indexation benefit on long-term capital gains from non-equity mutual fund schemes has been removed.

Also Read: No LTCG benefit on debt mutual funds from April 1, 2023

Hence, from the current financial year, the CII number cannot be used for debt mutual fund schemes, international equity mutual fund schemes etc.

A taxpayer will continue to use the CII number to calculate long-term capital gains from house property, land, and building in the event of a sale.

CII number notified by CBDT from 2001
Here are the CII numbers that are notified by the income tax department from the financial year 2001-02.

What is the formula to calculate inflation-adjusted purchase price?
As mentioned above, the CII number is used to calculate the inflation-adjusted price of a long-term asset. To calculate the inflation-adjusted price, the CII is used in the following manner-
Inflation-adjusted price = (CII of the sale year/CII of the purchase year) * Actual price of the asset.

Here is an example to understand how to calculate the inflation-adjusted price. Suppose, you bought a house in the financial year 2002-23 for Rs 15 lakh. The inflation-adjusted price of that house in the current fiscal year will be – (348/105)*15 lakh = Rs 49.71 lakh.

If you sell the house today above this price, then you will have long-term capital gains. If the selling price is below this price, then it will be a long-term capital loss.

Whether the capital gains are long-term or short-term depends on how long the asset has been held. The holding period also varies across the different asset classes.