Cost Inflation Index Calculator

 Calculate Cost Inflation Index :

The purchase price of the asset is indexed by the cost inflation index. The formula to calculate the cost inflation index is as follows :
Cost Inflation Index (CII) = Sales Amount - (Purchase Amount * (Index in year of sale / Index in year of purchase))
Suppose, you purchased an apartment for Rs.20 lakhs in financial year 2000-01 and sold it for Rs.35 lakhs in financial year 2009-10. Your profit or capital gain is Rs.15 lakhs. The CII for the year the apartment was bought in is 406. The CII for the year the apartment was sold in is 632.
The Indexed cost of property :

Capital Gain :
The tax liability if you use the indexation method is charged at 20 percent. The tax liability will be Capital Gain * 20% = 3,86,700 * 20 / 100 = Rs.77,340

 How is CII Useful in Reducing Tax ?

We saw in the earlier example that indexing helps us save a substantial amount of Income Tax that will be levied on the long term capital gain arising out of selling off your asset. But, indexation is not available for short term capital gain or losses. This benefit is also not available to Non-Resident Indians.

The indexation for long term capital gain is available only if you meet the following criteria:

1. Cost of acquisition of the asset has to be multiplied with the cost of inflation of the year it was transferred.
2. That figure is to be divided by the cost inflation index for the year in which the asset was acquired.
3. If the asset was purchased before 1981, the cost inflation index of the year 1981 must be taken into consideration.
4. If you have made improvement of the asset, then you need to adjust the cost inflation index with the multiplying with the CII of the year the improvement was made.