The Central Board of Direct Taxes (CBDT) has notified the Cost Inflation Index (CII) for the financial year 2025–26 at 376, up from 363 in 2024–25. The new index will be used to calculate long-term capital gains for the assessment year 2026–27 and subsequent years. The notification will come into effect from April 1, 2026.
The CII helps taxpayers adjust the purchase price of assets for inflation, thereby reducing their taxable capital gains when those assets are sold.
According to Amit Maheshwari, tax partner at AKM Global, a tax and consulting firm, the revision of the CII to 376 for FY26 is an annual update that enables taxpayers to adjust their capital gains for inflation more accurately each year.
“This effectively reduces the tax liability on long-term capital assets and ensures that individuals and businesses are taxed only on real gains, not on notional appreciation due to inflation. It is a key mechanism that brings fairness and efficiency to India’s capital gains tax regime. Historically, CII was used in cases of long-term capital gains for assets such as land, buildings, patents, gold, securities, etc,” said Maheshwari.
Notably, the Finance Act 2024 withdrew the benefit of indexation using the CII for all assets sold after July 23, 2024. However, taxpayers selling land or buildings acquired before that date can still choose between paying tax at 12.5 per cent without indexation or 20 per cent with indexation.
“In that case, taxpayers have the option to pay tax at 12.5 per cent without indexation or 20 per cent with indexation. Hence, the revised CII of 376 is useful for taxpayers who will sell land and buildings acquired before July 23, 2024,” Maheshwari added.
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