The Central Board of Direct Taxes (CBDT) has announced the Cost Inflation Index (CII) for the fiscal year 2023-24. The CII is a crucial tool for taxpayers in India to calculate gains arising from the sale of capital assets after adjusting for inflation. The index is used to determine the inflation-adjusted purchase price of assets, enabling taxpayers to compute long-term capital gains tax and remit advance tax on time.
What is the Cost Inflation Index (CII)?
The CII is notified under the Income-tax Act, 1961 every year. It is a tool used to calculate the indexed cost of acquisition while computing capital gains at the time of sale of any capital asset. The CII helps taxpayers adjust for inflation, which is a crucial factor in calculating long-term capital gains.
CII for FY 2023-24
The CII number for the current fiscal year beginning April 2023 and relevant to AY 2024-25 stands at 348, as per the notification of the CBDT. This is an increase from the CII number of 331 for the previous fiscal year and 317 for the financial year 2021-22. It is worth noting that the income tax department usually notifies the CII in the month of June.
Importance of CII for taxpayers
The CII is essential for taxpayers who need to compute long-term capital gains tax accurately. It helps taxpayers arrive at the inflation-adjusted purchase price of assets and calculate the taxable long-term capital gains. Normally, an asset needs to be retained for more than 36 months (24 months for immovable property and unlisted shares, 12 months for listed securities) to qualify as long-term capital gains. The CII helps taxpayers adjust for inflation and arrive at the correct purchase price of assets.
Impact of early notification of CII
The early notification of the CII for the current fiscal year is good news for taxpayers. It enables them to precisely and accurately compute tax on long-term gains in the first quarter of FY 2023-24 and pay the necessary advance tax. AMRG & Associates Senior Partner Rajat Mohan has stated that the early notification of the CII would help taxpayers remit advance tax on time.
The Cost Inflation Index (CII) is a vital tool for taxpayers in India. It enables them to calculate long-term capital gains tax accurately by adjusting for inflation. The early notification of the CII for the current fiscal year is beneficial for taxpayers, as it enables them to calculate their tax liability accurately and remit advance tax on time. The CII is an important aspect of taxation in India and is used extensively by taxpayers to calculate their tax liabilities.