The Income Tax Department has released the cost inflation index for 2022-23
New Delhi:
The Income Tax Department reported the Current Tax Cost Inflation Index to calculate long-term capital gains arising from the sale of real estate, securities and jewelry.
The Cost Inflation Index (CII) is used by a taxpayer to calculate profits arising from the sale of capital goods after adjusting for inflation.
The cost inflation index for 2022-23 relevant for assessment year 2023-24 is 331.
Rajat Mohan, senior partner of AMRG & Associates, said the CII will help taxpayers calculate long-term capital gains tax so that they can remit input tax on time.
“In recent years, the inflation index has risen faster, reflecting the rising inflation in the country,” added Mr Mohan.
AKM Global Head of Tax Markets Yeeshu Sehgal said the CII will benefit taxpayers as assets held for the long term are booked at purchase price despite rising inflation.
“It is very important to adjust the said cost of acquisition to the new Cost Inflation Index reported as 331, which will allow the capital gains tax to be calculated fairly and fairly,” said Mr. Sehgal.
CII or Cost Inflation Index is notified every year under the Income-tax Act, 1961. It is popularly used to calculate the “indexed acquisition cost” while the capital gains are calculated at the time of sale of capital goods.
Normally, an asset must be held for more than 36 months (24 months for real estate and private equity, 12 months for publicly traded securities) to qualify as a long-term capital gain.
Since the prices of goods rise over time, resulting in a decline in purchasing power, the CII is used to arrive at the inflation-adjusted purchase price of assets to calculate taxable long-term capital gains (LTCG).
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