Indexation inputs
How Indexed Cost of Acquisition Is Calculated
The Cost Inflation Index restates what you paid for an asset in the price level of the year you sold it, so that only the real gain is taxed. The formula is:
Indexed cost of acquisition = Cost of acquisition × (CII of year of transfer ÷ CII of year of acquisition)
Cost of improvement is indexed the same way, but from the year the improvement was actually incurred, not the year of purchase. The base year is FY 2001-02 with an index of 100 — for an asset acquired before that date, the fair market value as on 1 April 2001 replaces the original cost.
Worked Example
A residential house bought in FY 2010-11 for ₹40,00,000 and sold in FY 2025-26 for ₹1,20,00,000:
Indexed cost = 40,00,000 × (376 ÷ 167) ≈ ₹90,05,988. Long-term capital gain = 1,20,00,000 − 90,05,988 ≈ ₹29,94,012. Because the house was acquired before 23 July 2024, a resident individual may compare tax at 20% on this indexed gain against 12.5% on the unindexed gain of ₹80,00,000 and pay the lower amount.
Cost Inflation Index Table (FY 2001-02 to FY 2026-27)
| Financial year | Cost Inflation Index |
|---|---|
| FY 2001-02 | 100 |
| FY 2002-03 | 105 |
| FY 2003-04 | 109 |
| FY 2004-05 | 113 |
| FY 2005-06 | 117 |
| FY 2006-07 | 122 |
| FY 2007-08 | 129 |
| FY 2008-09 | 137 |
| FY 2009-10 | 148 |
| FY 2010-11 | 167 |
| FY 2011-12 | 184 |
| FY 2012-13 | 200 |
| FY 2013-14 | 220 |
| FY 2014-15 | 240 |
| FY 2015-16 | 254 |
| FY 2016-17 | 264 |
| FY 2017-18 | 272 |
| FY 2018-19 | 280 |
| FY 2019-20 | 289 |
| FY 2020-21 | 301 |
| FY 2021-22 | 317 |
| FY 2022-23 | 331 |
| FY 2023-24 | 348 |
| FY 2024-25 | 363 |
| FY 2025-26 | 376 |
| FY 2026-27 | 384 |
The index for FY 2026-27 was notified as 384 by CBDT Notification No. 85/2026 dated 15 July 2026. The index is notified annually, so confirm the current year’s figure on the Income Tax Department portal before filing.
When Indexation Is Still Available
Indexation was withdrawn for most assets transferred on or after 23 July 2024, with long-term gains taxed at 12.5%. Three situations still matter:
- Land and buildings acquired before 23 July 2024 — a resident individual or HUF may choose between 12.5% without indexation and 20% with indexation, whichever gives the lower tax.
- Transfers before 23 July 2024 — the earlier regime applies, with indexation and 20%.
- Debt mutual funds bought on or after 1 April 2023 — taxed at slab rates whatever the holding period, so indexation is not in play. Listed equity and equity funds under section 112A never had it.