Cost Inflation Index (CII) Calculator & Table

CII or Cost Inflation Index Calculator helps us to know the actual cost of acquisition of an assets when we are transferring or selling that asset.

Long term asset such as property is sold at a high price compared to original cost of acquisition, and hence it leads to higher profits and high tax to be paid due to capital gains. Here we need to use Cost Inflation Index Calculator to calculate the present value of the past cost incurred, to reduce the capital gains and tax liability.

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Cost Inflation Index for FY 2023-24 is 348.

What is Cost Inflation Index?

Cost Inflation Index is a way to know the present value of the cost that incurred in the past to acquire a long term capital asset
By Long term capital asset we mean properties, land, shares or equities, patents, trademarks, etc.
Selling of property or land is a perfect example where you can use Cost Inflation Index calculator
With time, due to inflation the price of goods increases
If you get 2 units of product for Rs. 100 today, than due to inflation, tomorrow you will get only one unit of this product with same Rs. 100 amount. This is inflation – increase in the price of goods
While you sell the long term assets, the cost that was used to buy the asset in the past remains same and you make high capital gains due to low cost of acquisition in the past. This will lead to high income tax as well
Here we should be using the Cost Inflation Index Calculator to know the actual cost of acquisition in today’s time which would increase due to inflation, thus decreasing the capital gains or profits made and lower income tax
And this is the reason we use Cost Inflation Index calculator while selling long term capital assets
Please note that capital gains with indexation benefits was calculated in debt funds previously.
From 1st April 2023, there will be no indexation benefit while making capital gains on Debt Mutual Funds

Cost Inflation Index Table from 2001-02 to 2023-24

Below is the Cost Inflation Index Table for FY 2001-02 to FY 2023-24:

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

Cost Inflation Index Table (CII)

As seen in above Cost Inflation Index Table, THE CII for FY 2023-24 is 348 and for the base year 2001-02 is 100.

How to use Cost Inflation Index Calculator?

Below are the steps to use Cost Inflation Index calculator:

Select the required Assessment year – AY 2024-25 is sales is done in FY 2023-24
Provide the purchase price – cost incurred to buy land or property or any other capital asset where indexation is applicable
Select the Purchase year – financial year when the asset was purchased
After providing these inputs, you will get total cost of acquisition with indexation benefit

Cost Inflation Index (CII) Formula

Below is the formula to calculate CI or Cost Inflation Index:

Total Cost of Acquisition = Purchase Price * CII of Year of Selling / CII of Year of Purchase

Example

So for example, if you bought land at Rs. 10,000 in FY 2001-02 when CII was 100 and sell it in Fy 2023-24 when CII is 348, below is the cost with indexation calculation:

Total Cost of Acquisition = Purchase Price * CII of Year of Selling / CII of Year of Purchase
Total Cost of Acquisition = Rs. 10,000 * 348 / 100
Total Cost of Acquisition = Rs. 10,000 * 3.48
Total Cost of Acquisition = Rs. 34,800

So actual cost will be considered as Rs. 34,800 instead of Rs. 10,000, which will reduce your capital gains thus reducing the tax liability.

How to use Cost Inflation Index in Income Tax?

While calculating the capital gains from long term assets selling, we need to calculate total cost of acquisition as of today’s date instead of the actual cost that incurred to buy the asset previously.

This is done to factor in the inflation rate that increases every year. With flat inflation rate of 5% or 6%, we cannot calculate the cost of acquisition in today’s date, and hence we need to use Cost Inflation Index Calculator and Table above.

This will help us to reduce the capital gains due to increase in the total cost to acquire the asset and hence reducing the tax liability as well, while paying income tax.

ALSO READ: How to Calculate Income Tax

Why is Cost Inflation Index used?

Cost Inflation Index is used to know the increased value of the long term asset when you are going to sell the asset. While selling the capital asset you incur long term capital gains which can be high if we consider original cost of acquisition.

Thus we need to use Cost Inflation Index Calculator to know the today’s value of the cost incurred in the past to buy the capital asset. This Cost Inflation Index will help us to increase the cost of capital asset due to increase in inflation every year, thus reducing the capital gains we have made by selling the asset. And when capital gains are reduced, we pay less income tax on such capital gains.

This is the main reason we should use Cost Inflation Index to reduce our income tax on long term capital gains.

Who decides Cost Inflation Index every year?

Every year, Cost Inflation Index is finalized by Government of India based on factors such as Consumer Price Index of previous year.

Consumer Price Index compares the current price of goods and services (which represent the economy) with the cost of the same goods and services in the previous year to calculate the increase in prices.

Conclusion

So Cost Inflation Index Calculator can be used while you are selling long term capital asset to know the total cost of acquisition in today’s date. This is mainly done to increase the cost of asset by considering inflation over time and will help to reduce capital gains while selling the asset and reducing tax liability.

You can use above Cost Inflation Index calculator to know the total cost of acquisition of your long term capital asset such as land, property, shares, etc.

Frequently Asked Questions

What is base year in Cost Inflation Index?

Base year for Cost Inflation Index is 2001-02 for which CII is 100. Previously it was 1981, but to make the calculations simple, it was reset to 2001-02.

What is the Cost Inflation Index for FY 2023-24?

Cost Inflation Index for FY 2023-24 is 348. Compared to base year FY 2001-02 which is 100. Full details of CII every year can be checked in CII table at the start of this article.

What is the Cost Inflation Index Formula?

Cost Inflation Index formula is very simple:

Total Cost of Acquisition = Purchase Price * CII of Year of Selling / CII of Year of Purchase

You can refer to CII of various years in the CII table mentioned above.

Difference between Inflation and Cost Inflation Index?

Inflation and Cost Inflation Index are similar as both helps in knowing the rate of increase in cost. Inflation is calculated based on previous year where as Cost Inflation Index helps to know the history of the rate at which inflation has increased over time. For one year calculations, we can simply use the inflation rate where as for multiple years, where we need to calculate the todays’ cost, we use Cost Inflation Index.

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Income Tax Calculator App – FinCalC

For Income Tax Calculation on your mobile device, you can Download my Android App “FinCalC” which I have developed for you to make your income tax calculation easy.

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