What’s the Value Inflation Index (CII) for FY 2024-25 (AY 2025-26)? CBDT notified Rs.363 because the Value of Inflation Index for FY 2024-25 (AY 2025-26) on Might 24, 2024.
The price of merchandise rises as time goes on, resulting in a lower within the shopping for energy of cash. For example, if Rs 1,00,000 may buy two items of products immediately, tomorrow the identical quantity would possibly solely be capable to purchase one unit attributable to inflation. The Value Inflation Index (CII) is utilized to calculate the escalation in costs of products and belongings yearly on account of inflation.
Within the Finances 2017, the Authorities proposed a modification within the base 12 months for calculating the indexation profit. Beforehand, the bottom 12 months was set at 1981, however now it has been modified to 2001. You will need to word that this variation applies to all asset courses, however the impression will differ relying on the belongings that take pleasure in indexation advantages for long-term capital beneficial properties, resembling actual property, unlisted shares, gold, and bond funds.
Earlier than thirty first March 2017, the capital achieve was decided utilizing the acquisition worth based mostly on the truthful market worth of 1981. This meant that for belongings bought earlier than 1st April 1981, the acquisition worth may very well be calculated utilizing the truthful market worth of 1981. Nevertheless, ranging from 1st April 2017, the acquisition worth can be calculated utilizing the truthful market worth of 2001. Consequently, capital beneficial properties on belongings acquired earlier than 1st April 2001 may also be calculated utilizing the truthful market worth as of 2001.
What’s the Value Inflation Index (CII)?
It’s a metric for inflation utilized within the calculation of Lengthy Time period Capital Positive aspects (LTCG) from the sale of capital belongings in keeping with IT Part 48. This metric is asserted yearly for every Monetary Yr.
Subsequently, the relevant CII fee will correspond to the precise monetary 12 months in query. Calculating the LTCG is essential in figuring out a capital achieve, and the Value of Inflation Index (CII) is important for this objective. An instance can illustrate how the listed price of acquisition is computed utilizing the CII.
Listed Value of Acquisition=(Value of Acquisition/Value of Inflation Index (CII) for the 12 months by which the asset was first held by the assessee OR FY 2001-02, whichever is later)* Value of the Inflation Index (CII) for the 12 months by which the asset was offered or transferred.
Allow us to assume that you simply bought the property in FY 2005-06 at Rs.50 lakh and offered the identical in FY 2017-18 at Rs.1.5 Cr. Now the listed price of acquisition can be as per the above system i.e.
Listed Value of Acquisition=(Rs.50 lakh/117)*272=Rs.1,16,23,931. So the Lengthy Time period Capital Acquire=Promoting Worth-Listed Value of shopping for property = Rs.33,76,069.
(Observe- As per the beneath Value of Inflation Index (CII), the CII fee for FY 2017-18 is 272, and for FY 2005-06, it’s 117).
Nevertheless, neglecting the listed price would end in an easy achieve of Rs.1 crore (Rs.1.5 crore – Rs.50 lakh). Nevertheless, in the case of taxation, the Lengthy-Time period Capital Positive aspects (LTCG) on capital belongings can be calculated after adjusting the acquisition price for inflation utilizing the Value of Inflation Index (CII).
Value Inflation Index (CII) for FY 2024-25 (AY 2025-26)
Let me share with you the Value Inflation Index (CII) from FY 2001-02 to FY 2024-25.
Now allow us to see how this price of inflation index is growing 12 months on 12 months from the bottom 12 months to the newest FY 2024-25.
You seen that from final 12 months to this 12 months, the increment is round 4.3%. Hope this data will assist you in arriving at your capital achieve tax.