The notification, issued on July 15 under Section 72(8)(a) of the Income-tax Act, 2025, will apply from April 1, 2026, for Tax Year 2026-27 and subsequent tax years.
The newly notified index of 384 is higher than the 376 notified for FY2025-26, reflecting the increase in inflation over the past year.
What is the Cost Inflation Index?
The Cost Inflation Index is a number notified annually by the CBDT to account for inflation while computing capital gains tax. It allows taxpayers to adjust the purchase price of eligible long-term assets for inflation, increasing the asset’s cost of acquisition and thereby reducing taxable capital gains.
In simple terms, a higher CII generally means a higher indexed purchase cost and, where indexation is available, a lower tax liability on capital gains.
Who will benefit?
The notification is relevant only for taxpayers and transactions where indexation continues to be available under the Income-tax Act.
Following changes announced in the 2024 Union Budget, indexation has been withdrawn for most newly acquired capital assets. However, certain taxpayers continue to have the option of claiming indexation.
For example, resident individuals and Hindu Undivided Families (HUFs) selling land or buildings acquired before July 23, 2024, may opt for the earlier capital gains tax regime with indexation, where they are eligible and where it results in a lower tax liability.
For such taxpayers, the FY27 Cost Inflation Index of 384 will be used to compute the indexed cost of acquisition while calculating long-term capital gains.
Why the notification matters
Although the annual CII notification is a routine exercise, it provides certainty for taxpayers, tax professionals and businesses undertaking capital gains calculations during the financial year.
