Cost Inflation Index (CII): Complete Table FY 2025-26, Indexation Benefit & Capital Gains Calculation

The Cost Inflation Index (CII) is a crucial mechanism that allows taxpayers to adjust the purchase price of capital assets for inflation when calculating Long Term Capital Gains (LTCG). By using CII for indexation, taxpayers can inflate the acquisition cost of assets to reflect current prices, thereby reducing taxable capital gains and paying tax only on real gains rather than notional appreciation due to inflation. The CII for FY 2025-26 is 376, notified by CBDT vide Notification No. 70/2025 dated 1st July 2025. However, the Finance Act 2024 has significantly restricted indexation benefits from July 23, 2024, making this topic more nuanced. This comprehensive guide covers the complete CII table from 1981-82 to 2025-26, how to calculate indexed cost of acquisition and improvement, detailed examples, Finance Act 2024 changes, and when indexation still applies.

What is Cost Inflation Index (CII)?

Cost Inflation Index (CII) is an inflation adjustment index notified annually by the Central Board of Direct Taxes (CBDT) to measure inflation and allow taxpayers to adjust the purchase price of assets accordingly when computing capital gains.

Current CII for FY 2025-26

How is CII Calculated?

CII is calculated based on the Consumer Price Index (CPI) published by the Ministry of Statistics and Programme Implementation. The formula used by CBDT is:

Complete Cost Inflation Index Table (1981-82 to 2025-26)

How to Use Cost Inflation Index for Indexation

Formula for Indexed Cost of Acquisition

Formula for Indexed Cost of Improvement

Important Rules for Indexation

Capital Gains Calculation with Indexation

Complete Formula for Long Term Capital Gains

Detailed Examples - Step by Step Calculation

Finance Act 2024 Changes - Major Impact on Indexation

Illustration - Choice Between Options (Property Acquired Before July 23, 2024)

When Does Indexation Apply and Not Apply?

Assets Where Indexation APPLIES (Subject to Finance Act 2024 Changes)

Assets Where Indexation NEVER Applies

• Short Term Capital Assets: Held for ≤24 months (36 months for immovable property till AY 2017-18)
• Equity Shares/Equity MF: Always @10% LTCG without indexation (Securities Transaction Tax paid)
• Zero Coupon Bonds: Special rate without indexation
• Depreciable Assets: Computed under special provisions (Sections 50, 50A)

New Tax Regime vs Old Tax Regime - Impact on Indexation

Practical Tips for Using CII

1. Maintain Purchase Documents:
   • Keep original purchase deed, payment receipts
   • Document any improvements with bills and receipts
   • Critical for claiming indexed cost
2. Record Improvement Year:
   • Note financial year of each improvement
   • Each improvement indexed separately using its year's CII
3. Assets Acquired Before 2001:
   • Get professional valuation as on 1st April 2001
   • Can use higher of cost or FMV as on 1.4.2001
   • Keeps indexed cost higher, reduces gains
4. For Property Sold After July 23, 2024:
   • If acquired before July 23, 2024 - calculate LTCG both ways
   • Choose option resulting in lower tax
   • Engage CA for accurate calculation
5. Use CII of Correct Year:
   • Use Financial Year, not Assessment Year
   • FY is April to March (FY 2025-26 = April 2025 to March 2026)
   • Transfer date determines FY and hence CII
6. Check Latest CII Annually:
   • CBDT notifies new CII every year around June/July
   • Use updated CII for current year sales
   • Refer Income Tax Department website for official notifications

Common Mistakes to Avoid

Frequently Asked Questions (FAQs)

Key Takeaways for FY 2025-26

• CII for FY 2025-26 is 376 (notified by CBDT on 1st July 2025)
• CII adjusts asset purchase price for inflation to compute real capital gains
• Formula: Indexed Cost = (Cost × CII of Sale Year) ÷ CII of Purchase Year
• Base year is 2001-02 = 100 (for assets purchased before 2001, use CII 100 or FMV as on 1.4.2001)
• Finance Act 2024 major change: Indexation withdrawn for most assets sold after July 23, 2024
• Exception: Land/buildings acquired before July 23, 2024 - choice between 12.5% or 20% with indexation
• Indexation only for LTCG, not for Short Term Capital Gains
• Both cost of acquisition and improvement can be indexed separately
• Use Financial Year CII, not Assessment Year
• For old properties (>10 years holding), indexation @20% usually better than 12.5% flat rate
• CBDT notifies new CII annually around June/July for upcoming FY
• Indexation benefit available in both old and new tax regimes
• Keep proper documentation of purchase, improvements, and transfer expenses
• Calculate both options (with/without indexation) for property sales to minimize tax
• Engage tax professional for accurate calculation, especially for properties held long-term

Conclusion

The Cost Inflation Index (CII) has been a cornerstone of India's capital gains tax framework, ensuring that taxpayers are taxed only on real economic gains rather than notional appreciation caused by inflation. For over two decades, CII has provided significant relief to long-term investors by allowing them to adjust their asset acquisition costs for inflation, thereby reducing taxable capital gains substantially.

The CII for FY 2025-26 stands at 376, continuing the upward trajectory that reflects India's inflationary trends. For taxpayers who purchased assets years or decades ago, this inflation adjustment makes a substantial difference in tax liability - often saving lakhs of rupees in taxes on property sales or other capital asset transactions.

However, the Finance Act 2024 has fundamentally altered the indexation landscape. The withdrawal of indexation benefits for most asset classes sold after July 23, 2024, represents a major policy shift toward simplification but at the cost of higher effective tax rates for long-term holders. The introduction of a flat 12.5% LTCG rate without indexation makes tax calculation simpler but can result in higher taxes for assets held over extended periods where inflation adjustment would have been substantial.

The saving grace is the special provision for land and buildings acquired before July 23, 2024, which allows taxpayers to choose between the old regime (20% with indexation) and new regime (12.5% without indexation). This grandfathering provision recognizes that investors who purchased property under the old tax framework should not be penalized by retrospective changes. For such properties, CII remains highly relevant and taxpayers must carefully calculate both options to minimize tax liability.

As we progress through FY 2025-26, understanding CII becomes critical for anyone planning to sell property or other long-term capital assets acquired before July 23, 2024. The calculation may seem complex initially, but with the complete CII table, clear formulas, and step-by-step examples provided in this guide, taxpayers can accurately compute their indexed costs and make informed decisions about optimal timing of asset sales and choice of tax calculation method.

Looking ahead, while CII's role has diminished for new transactions post-July 23, 2024, it will remain relevant for years to come as countless properties and assets acquired before this cutoff date continue to be sold. Maintaining proper documentation of purchase prices, improvement costs, and dates becomes even more critical now, as these records will determine whether beneficial indexation can be claimed.

Need Help Calculating Capital Gains with Indexation? Explore our guides on Capital Gains Tax, Section 54 Exemption, Property Sale Tax Guide, and Capital Gains Account Scheme for comprehensive solutions.