Cost Inflation Index for FY 2025-26 Notified by CBDT

Cost Inflation Index for FY 2025-26 Notified by CBDT

The Central Board of Direct Taxes (CBDT), under the Ministry of Finance, has officially notified the Cost Inflation Index (CII) for the Financial Year 2025-26. This index plays a crucial role in calculating long-term capital gains under the Income-tax Act, 1961.

📢 Key Highlights of the Notification:

• Notification Number: 70/2025 dated 1st July, 2025
• Authority: Issued under clause (v) of the Explanation to Section 48 of the Income-tax Act, 1961
• New Cost Inflation Index for FY 2025-26: 376
• Applicable Assessment Year: AY 2026-27 and onwards
• Effective Date: 1st April, 2026

🧾 What Is the Cost Inflation Index (CII)?

The Cost Inflation Index is a tool used to account for inflation when calculating the long-term capital gains (LTCG) on the sale of capital assets like property, gold, or mutual funds. It helps in adjusting the purchase price of the asset to reflect inflation, thereby reducing the taxable capital gain.

📈 Why Is This Important?

When an individual sells a long-term capital asset, the purchase cost is adjusted using the CII to arrive at the indexed cost of acquisition. The formula used is:

Indexed Cost = (Purchase Price × CII of year of sale) / CII of year of purchase

This reduces the capital gains and hence the tax liability.

🔢 Snapshot of CII Over the Years:

🗓️ Historical Reference:

The base year for CII calculation is FY 2001-02, with an index value of 100. This change was introduced through Notification No. S.O. 1790(E) dated 5th June 2017, and this latest update continues the series.

Conclusion:

With the CII for FY 2025-26 set at 376, taxpayers and professionals should use this index while calculating long-term capital gains for assets sold in FY 2025-26 (AY 2026-27). This adjustment ensures fair taxation after accounting for inflation, reducing undue tax burden on genuine gains.

Stay updated with such changes to ensure accurate tax planning and compliance.

Notification

Costly ITR Mistakes to Avoid in 2025 (Save Money):
https://www.youtube.com/shorts/xeTgjvfEt6o

Also Read: New Income-tax Bill 2025 Navigator

Also Read:

1. Recommendations of the 55th Meeting of the GST Council
2. Changes in GST and Income Tax during the Financial Year 2024-25
3. TDS and TCS provisions applicable from April 1, 2025
4. Rationalizing TDS: A Deep Dive into Budget 2025’s Proposals

Go To Memorandum

Go To Finance Bill 2025

Read More on Union Budget 2025