Cost Inflation Index (CII) FY 2023–24

Cost Inflation Index (CII) FY 2023–24

The Cost Inflation Index for FY 2023-24 is 348, notified by CBDT under the second proviso to Section 48 of the Income-tax Act, 1961. You use this figure to compute the indexed cost of acquisition on long-term capital assets — which shrinks your taxable LTCG by adjusting the original purchase price for inflation. Finance (No. 2) Act, 2024 removed indexation for most assets transferred on or after 23 July 2024, but CII 348 remains directly relevant for prior-year computations, updated returns, reassessments, and the grandfathering option available to resident individuals and HUFs on land or building purchased before 23 July 2024.

What the Cost Inflation Index Actually Does — and Why Section 48 Needs It

When you buy a flat for Rs. 30 lakh in 2005 and sell it for Rs. 1.80 crore in 2024, you have not genuinely earned Rs. 1.50 crore in real terms. Inflation has eroded the rupee's value every year between those dates. Without adjustment, you would pay tax on a nominal gain that partly reflects nothing more than the decline in purchasing power.

Section 48 of the Income-tax Act, 1961 corrects for this through indexed cost of acquisition. The formula is:

> Indexed Cost = Actual Cost × (CII of Transfer Year ÷ CII of Acquisition Year)

CBDT notifies the CII each financial year under Section 48 read with Section 55(2)(b). The base year is FY 2001-02 = 100. Every subsequent year's CII reflects the cumulative inflation from that anchor.

Two important rules flow from Section 55(2)(b):

• If you acquired the asset before 1 April 2001, you may substitute the actual cost with the Fair Market Value (FMV) on 1 April 2001 — whichever is higher — and use CII 100 as the denominator. You need a registered valuer's report to support the FMV figure.
• For inherited or gifted assets, the acquisition date that governs the CII denominator is the original owner's date of purchase, not the date you received the asset.

Indexed cost applies equally to cost of improvement — capital expenditure incurred on the asset after purchase. Each improvement is indexed separately using the CII of the year in which the expenditure was made.

CBDT-Notified CII Table: FY 2001-02 to FY 2024-25

This is the authoritative reference for every indexed LTCG computation. Always cross-check against the official CBDT notification on the Income Tax India portal (incometax.gov.in) for years beyond those listed, as CII for any year cannot be used until officially notified.

> FY 2025-26 CII: Verify the notified figure on the CBDT portal or Gazette Notification before using it in any computation. CBDT typically issues this notification by June of the relevant financial year.

The Section 48 Formula — Applied Step by Step

Follow this sequence every time you compute an indexed LTCG:

1. Confirm long-term status. For immovable property (land or building), the holding period must exceed 24 months. For listed equity and equity mutual funds, it is 12 months. For gold, jewellery, unlisted shares, and most other capital assets, it is 24 months (or 36 months in some cases — verify for the specific asset class).

1. Identify the acquisition date. For gifted or inherited property, the previous owner's date of original purchase determines both the holding period and the CII denominator year.

1. Determine the cost of acquisition. Use the actual purchase price from the registered sale deed. For pre-2001 assets, compare it with FMV on 1 April 2001 and take the higher figure. For inherited assets, you take the cost in the hands of the previous owner (or FMV on 1 April 2001 if the original acquisition was before that date).

1. Look up CII values:
2. Numerator: CII of the year of transfer
3. Denominator: CII of the year of acquisition (or FY 2001-02 = 100, if acquired before 1 April 2001)

1. Compute indexed cost of each improvement separately using the CII of the year in which the improvement expenditure was incurred.

1. Calculate LTCG:

Sale Consideration − Indexed Acquisition Cost − Indexed Improvement Cost(s) − Transfer Expenses Transfer expenses include brokerage, stamp duty paid by seller, and registration charges on the sale.

1. Apply the correct rate — 20% (with indexation, pre-23 July 2024 transfers) or whichever applies under the post-July 2024 regime described below.

Worked Example 1: House Sold in FY 2023-24 — CII 348 at Full Stretch

This is the core scenario for CII 348. A residential property was purchased in FY 2005-06 for Rs. 30,00,000 (CII = 117) and sold in FY 2023-24 for Rs. 1,80,00,000 (CII = 348). The owner had renovated the kitchen and bathrooms in FY 2015-16, spending Rs. 5,00,000 (CII = 254). Brokerage of Rs. 1,80,000 was paid on the sale.

Step 1 — Indexed cost of acquisition: Rs. 30,00,000 × (348 ÷ 117) = Rs. 30,00,000 × 2.9744 = Rs. 89,23,077

Step 2 — Indexed cost of improvement: Rs. 5,00,000 × (348 ÷ 254) = Rs. 5,00,000 × 1.3701 = Rs. 6,85,039

Step 3 — LTCG: Rs. 1,80,00,000 − Rs. 89,23,077 − Rs. 6,85,039 − Rs. 1,80,000 = Rs. 82,11,884

Step 4 — Tax at 20% + 4% health and education cess: Rs. 82,11,884 × 20.8% = Rs. 17,08,072

For comparison, without indexation the LTCG would have been Rs. 1,43,20,000 and the tax Rs. 29,78,560. Indexation saved Rs. 12,70,488 in this single transaction. Getting the CII or the acquisition year wrong by even one year can cost lakhs.

Finance Act 2024: What Changed from 23 July 2024

Finance (No. 2) Act, 2024 fundamentally restructured LTCG taxation. For transfers on or after 23 July 2024:

• The LTCG tax rate under Section 112 was reduced from 20% to 12.5%.
• The second proviso to Section 48 — which permitted indexed cost computation — was made inapplicable for transfers on or after that date.
• For listed equity and equity-oriented mutual funds under Section 112A, the rate increased from 10% to 12.5% (indexation was already not available under Section 112A).

The legislative intent was to offer a lower flat rate in exchange for removing the inflation-adjustment benefit. For assets with strong appreciation over short-to-medium holding periods, this trade-off often favours the taxpayer. For assets held 20-plus years — particularly property bought in the early 2000s — the removal was deeply adverse, prompting Parliament to insert a grandfathering provision.

One asset class where NRIs and foreign taxpayers should take note: The grandfathering provision described below is available only to resident individuals and HUFs. NRIs selling land or building in India on or after 23 July 2024 do not have the option to use 20% with indexation — only the 12.5% flat rate applies.

The Grandfathering Option: Land and Building Purchased Before 23 July 2024

For resident individuals and HUFs who sell land or building purchased (or acquired) before 23 July 2024, a special provision applies regardless of when the sale happens. You compute tax under both methods and pay whichever produces the lower liability:

• Option A: 20% of LTCG computed with indexation (using the full CII table up to the year of transfer)
• Option B: 12.5% of LTCG computed without indexation

This is not a one-time election. It applies to every eligible sale, and you must re-run both computations each time.

Worked Example 2: When Option B (No Indexation) Wins

A plot purchased in FY 2003-04 for Rs. 8,00,000 (CII = 109) is sold in FY 2024-25 for Rs. 90,00,000 (CII = 363).

Option A (20% with indexation): Indexed cost = Rs. 8,00,000 × (363 ÷ 109) = Rs. 8,00,000 × 3.3303 = Rs. 26,64,220 LTCG = Rs. 90,00,000 − Rs. 26,64,220 = Rs. 63,35,780 Tax at 20% + 4% cess = Rs. 63,35,780 × 20.8% = Rs. 13,17,842

Option B (12.5% without indexation): LTCG = Rs. 90,00,000 − Rs. 8,00,000 = Rs. 82,00,000 Tax at 12.5% + 4% cess = Rs. 82,00,000 × 13% = Rs. 10,66,000

→ Option B saves Rs. 2,51,842. When the purchase price is very low relative to current value, even tripling the cost through indexation still leaves a large taxable gain, and the lower rate wins.

Worked Example 3: When Option A (With Indexation) Wins

Same plot, same sale price — but purchase price was Rs. 25,00,000 instead of Rs. 8,00,000.

Option A (20% with indexation): Indexed cost = Rs. 25,00,000 × 3.3303 = Rs. 83,25,688 LTCG = Rs. 90,00,000 − Rs. 83,25,688 = Rs. 6,74,312 Tax at 20% + 4% cess = Rs. 6,74,312 × 20.8% = Rs. 1,40,257

Option B (12.5% without indexation): LTCG = Rs. 90,00,000 − Rs. 25,00,000 = Rs. 65,00,000 Tax at 12.5% + 4% cess = Rs. 65,00,000 × 13% = Rs. 8,45,000

→ Option A saves Rs. 7,04,743. When the original cost is substantial and the holding period is long, indexation compresses the gain dramatically, and the higher rate still produces a lower absolute tax.

Takeaway from both examples: The crossover between Option A and Option B depends on three variables — original cost, years held, and sale price. Never assume. Always run both calculations before signing the sale deed.

Where CII 348 Still Matters in FY 2026-27 / AY 2027-28

The regime shift did not make old CII values irrelevant. CII 348 has ongoing operational uses:

• Updated returns under Section 139(8A): You can file ITR-U for up to two assessment years before the current year. In FY 2026-27, that includes AY 2024-25 (income of FY 2023-24). Capital gains on assets transferred in FY 2023-24 are computed using CII 348. The index does not get retroactively revised.

• Grandfathering where acquisition year is FY 2023-24: If you purchased land or building in FY 2023-24 (before 23 July 2024) and are now selling it in FY 2026-27 or later, CII 348 is your denominator in Option A.

• Reassessment and scrutiny proceedings: Any reassessment notice for AY 2024-25 involving capital gains on assets sold in FY 2023-24 will require you to produce and defend computations using CII 348. Keep documentation ready.

• Section 54EC bond tracking: If you sold a long-term asset in FY 2023-24 and invested LTCG (computed at CII 348) in NHAI or REC bonds under Section 54EC, those bonds carry a mandatory 5-year lock-in. Premature redemption reverses the exemption. The lock-in period expires in FY 2028-29 for transfers made in FY 2023-24. Track this in your compliance calendar.

• Inheritance and gifts of FY 2023-24 assets: If an asset acquired in FY 2023-24 at CII 348 is subsequently gifted, the recipient uses CII 348 as the acquisition-year index when they eventually sell.

Pitfalls to Avoid When Applying Indexation

Using the wrong acquisition year for inherited property

For a property your parent purchased in FY 2004-05 (CII = 113) and gifted to you in FY 2018-19 (CII = 280), your CII denominator is 113, not 280. Using the year of receipt inflates the indexed cost and creates a risk of disallowance during scrutiny.

Skipping FMV on 1 April 2001 for pre-2001 assets

For an asset acquired before 1 April 2001, the law permits you to take FMV on that date as cost (if higher than actual cost). A flat in south Mumbai purchased in 1988 for Rs. 2 lakh likely had an FMV of Rs. 20-30 lakh on 1 April 2001. Using the original Rs. 2 lakh is a costly oversight. Commission a registered valuer's report under Rule 11UA; it is deductible as a cost of improvement.

Treating all improvements as a single year

If you renovated a property in both FY 2010-11 and FY 2018-19, each tranche is indexed separately. Lumping them together and using a single averaged CII produces an incorrect figure. Maintain year-wise records of improvement expenses with dated receipts and contractor invoices.

Applying indexation to non-eligible assets post-July 2024

Listed equity, equity mutual funds, gold, and debt mutual funds transferred on or after 23 July 2024 no longer benefit from indexation. Attempting to claim indexed cost for these assets will produce a demand notice. The flat 12.5% rate applies to the unindexed gain.

Defaulting to one grandfathering option without computing both

Given that the difference between Option A and Option B can exceed Rs. 7 lakh on a single property transaction (as shown in the examples above), skipping the comparison is not a time-saving measure — it is a potential tax overpayment or underpayment.

Transposing numerator and denominator

The formula requires CII of the transfer year as the numerator and CII of the acquisition year as the denominator. Reversing them — a surprisingly frequent data entry error — produces a radically wrong indexed cost. Always label your cells or columns when building a spreadsheet.

Filing Schedule CG: The CII Steps You Cannot Skip

When filing ITR-2 or ITR-3 on the e-filing portal (eportal.incometax.gov.in), here is how CII feeds into the return:

1. Navigate to Schedule CG → Part B (Long-Term Capital Gains) for immovable property and non-equity long-term assets.

1. For the grandfathering computation, the portal provides a bifurcated input structure: enter both Option A and Option B figures. The system selects the lower tax automatically, but verify the output before submission.

1. Enter the year of acquisition and year of transfer accurately. The portal computes the indexed cost automatically once CII years are input, but cross-check against your manual calculation — portal computation logic has occasionally had errors in edge cases.

1. Reconcile against AIS and TIS data. The Annual Information Statement (AIS) and Tax Information Summary (TIS) pre-fill sale consideration based on registrar data and broker feeds. Verify these figures against your actual sale deed — stamp duty circle-rate valuations and actual sale prices do not always match.

1. Claim Section 54, 54B, 54EC, or 54F deductions in the relevant fields. Note the investment deadlines:
2. Section 54 / 54F: Purchase within 1 year before or 2 years after transfer, or construction within 3 years
3. Section 54B: Purchase within 2 years after transfer
4. Section 54EC: Investment in notified bonds (NHAI, REC) within 6 months of transfer; maximum Rs. 50 lakh per financial year

Documents to retain for 7 years:

• Original purchase deed and chain of title (for inherited property, go back to the original owner)
• Registered valuer's FMV certificate for assets held as on 1 April 2001
• Year-wise improvement receipts (architect fees, contractor bills, material invoices)
• Sale deed with actual consideration
• Form 26AS, AIS, and TIS printouts from the income tax portal for the relevant year
• Section 54EC bond certificate and redemption record

Key Takeaways

• CII for FY 2023-24 = 348, as notified by CBDT. This is the transfer-year index for any long-term capital asset sold between 1 April 2023 and 31 March 2024, and the acquisition-year index for assets purchased in FY 2023-24 (before 23 July 2024) that are sold in any later year.
• Finance (No. 2) Act, 2024 removed indexation for most assets transferred on or after 23 July 2024, substituting a flat 12.5% LTCG rate under Section 112 in place of 20% with indexation.
• Resident individuals and HUFs retain a grandfathering option for land or building purchased before 23 July 2024: compute tax at both 20% with indexation and 12.5% without, and pay the lower figure. This option applies to future sales indefinitely — not just FY 2024-25.
• Assets acquired before 1 April 2001 are eligible for FMV on that date as deemed cost; always obtain a registered valuer's report and use CII 100 as denominator.
• Inherited and gifted assets carry the original owner's acquisition date and cost for CII purposes — use the previous owner's year as denominator, not the year you received the asset.
• CII 348 remains operationally live in FY 2026-27 for updated returns (ITR-U) under Section 139(8A), reassessment proceedings for AY 2024-25, and grandfathering computations where FY 2023-24 was the acquisition year.
• Section 54EC has a hard 6-month deadline from the date of transfer. Compute your LTCG using the correct CII first, then invest the precise amount within the window — a single day's delay disqualifies the exemption entirely.