Income Tax Department produces the cost inflation index for the current fiscal year

16 Jun 2022 , 11:08 AM

The cost inflation index for the current fiscal year has been published by the Income Tax Department for use in calculating long-term capital gains from the sale of immovable property, securities, and jewelry. A taxpayer uses the cost inflation index (CII) to calculate gains from the sale of capital assets after inflation is factored in.

331 is the Cost Inflation Index for FY 2022-23, which corresponds to AY 2023-24.

The CII, according to AMRG & Associates Senior Partner Rajat Mohan, will assist taxpayers in calculating long-term capital gains tax and remitting advance tax on time.

"The inflation index has been growing at a quicker rate in recent years, indicating rising inflation in the country," Mohan noted.

According to AKM Global Head of Tax Markets Yeeshu Sehgal, the CII would benefit taxpayers since long-term assets will be recognized at purchase cost despite rising inflation.

"It is critical to adjust the aforementioned purchase cost with the new cost inflation index notified as 331," Sehgal added, "so that the capital gains tax may be computed rationally and equitably."

Every year, the CII, or Cost Inflation Index, is published in accordance with the Income-tax Act of 1961. When computing capital gains at the time of sale of any capital asset, it is commonly employed to compute the "indexed cost of purchase."

To qualify for long-term capital gains, an asset must be held for longer than 36 months (24 months for immovable property and unlisted shares, 12 months for listed securities).

Because the price of products rises over time, lowering buying power, the CII is used to calculate taxable long-term capital gains by calculating the inflation-adjusted purchase price of assets (LTCG).