Cost Inflation Index: Meaning, Formula, Table, and Tax Benefits

In summary

The Cost Inflation Index (CII) is a number notified by the Central Government for each financial year. It is used to calculate the inflation-adjusted cost of eligible capital assets for capital-gains computation.

The CII base year is FY 2001-02, with a value of 100. The latest notified values are 376 for FY 2025-26 and 384 for FY 2026-27.

• Purpose: Adjusts eligible acquisition or improvement costs for inflation.
• Base year: FY 2001-02, with a CII of 100.
• Formula: Acquisition cost × CII of transfer year ÷ CII of acquisition year.
• Indexation: Generally unavailable for assets transferred from 23 July 2024.
• Grandfathering: Certain resident individuals and HUFs can use indexation for qualifying older land or buildings.
• Authority: The Central Government notifies CII values through the applicable legal framework.

CII should not be confused with the Consumer Price Index (CPI). CII is specifically used for prescribed capital-gains calculations.

The Cost Inflation Index is a statutory index used to adjust the cost of certain capital assets for inflation. Historically, this adjustment helped distinguish the portion of an asset's price increase attributable to inflation from the remaining capital gain.

For eligible transactions where indexation applies, the adjusted amount is called the indexed cost of acquisition or indexed cost of improvement.

The CII is relevant to mutual funds, property, and certain other capital assets, but indexation does not apply universally. The tax treatment depends on the asset, acquisition date, transfer date, and applicable provisions.

The Income Tax Department's latest notification under Section 72(8)(a) of the Income Tax Act, 2025 gives the following CII values.

Last updated: October 2026

For a complete historical table, the Income Tax Department's notified CII list covers every financial year from FY 2001-02 onwards.

Where indexation is permitted, CII is used to increase the acquisition or improvement cost in line with the prescribed inflation adjustment.

The basic formula is:

Indexed Cost of Acquisition = Actual Cost of Acquisition × CII of Transfer Year ÷ CII of Acquisition Year

For improvement expenditure:

Indexed Cost of Improvement = Cost of Improvement × CII of Transfer Year ÷ CII of Improvement Year

For eligible assets acquired before 1 April 2001, the rules can allow the fair market value as on 1 April 2001 to be considered instead of the actual cost, subject to applicable conditions. You can read more about Fair Market Value.

Consider Rohan, who purchased a qualifying property for Rs. 15 lakh in FY 2007-08 and sold it in FY 2017-18.

The applicable CII values are 129 and 272.

Indexed cost = Rs. 15,00,000 × 272 ÷ 129 = approximately Rs. 31,62,791

The indexed cost is then considered while calculating capital gains where indexation is legally available.

The example demonstrates the mechanism rather than determining Rohan's final tax liability. Expenses related to transfer, exemptions, and other applicable provisions may also affect the final computation.

The current CII series uses FY 2001-02 as the base year, with a value of 100. The base year was changed from FY 1981-82 because obtaining reliable valuations for assets acquired before 1 April 1981 could be difficult.

For an asset acquired before 1 April 2001, the taxpayer can generally use the fair market value as on 1 April 2001 or the actual cost, subject to the applicable tax rules.

The base-year concept is particularly important when calculating the cost of older property and other eligible assets.

Indexation was generally removed for long-term capital assets transferred on or after 23 July 2024. The general LTCG rate for such transfers is 12.5% without indexation.

However, there is an important grandfathering provision. A resident individual or HUF transferring land or a building acquired before 23 July 2024 can compare the tax under the new 12.5% regime without indexation with the earlier 20% regime using indexation and opt for the more beneficial treatment where the statutory conditions are met.

This means CII remains relevant even though indexation is no longer generally available.

You can understand the concept further through Indexation in Mutual Funds and Long Term Capital Gains Tax.

Indexation depends on the type and date of the asset.

Historically, it has been relevant to eligible land, buildings, and certain other long-term capital assets. However, the 2024 tax amendments significantly restricted its use for transfers from 23 July 2024.

For example, long-term gains covered by Section 112A, including qualifying equity shares and equity-oriented mutual funds, do not receive indexation. Similarly, specified debt mutual funds acquired from 1 April 2023 have separate capital-gains treatment, and indexation is generally unavailable.

You can also read about debt mutual funds when considering how different investment categories are taxed.

Inflation refers to a broad increase in the prices of goods and services over time. CII is a statutory index used specifically for certain capital-gains calculations.

For example, general inflation can affect the purchasing power of Rs. 1 lakh, while CII provides a prescribed factor for adjusting eligible asset costs under Income Tax rules. 

CII is therefore a tax calculation index, not a general measure of household inflation.

The Central Government notifies the CII for each relevant financial year. The Income Tax Department's current table is issued under the Income Tax Act, 2025, with the latest notification dated 15 July 2026 specifying the CII for FY 2026-27 as 384.

The CII is consequently not something taxpayers calculate themselves. They use the notified value applicable to the relevant financial year.

Before applying CII, check the transaction date, asset type, acquisition date, improvement expenditure, and whether indexation is legally available.

• Asset type: Confirm that the asset falls within the provisions permitting indexation.
• Acquisition date: Determine whether the asset was acquired before or after the relevant legislative change.
• Transfer date: Check whether the transfer occurred before or from 23 July 2024.
• Base year: For older assets, determine whether the 1 April 2001 valuation rules apply.
• Tax status: Check whether you are an individual, HUF, company, or another taxpayer category.
• Grandfathering: Resident individuals and HUFs should check the special land-and-building provision.
• Other costs: Include eligible acquisition, improvement, and transfer expenses according to the applicable rules.

For broader capital-gains analysis, see Short Term Capital Gains Tax, Short Term vs Long Term Capital Gains, and LTCG on Property.

The Cost Inflation Index is a statutory tool used to adjust the cost of eligible capital assets for inflation when indexation is permitted. The current CII series starts at 100 for FY 2001-02 and reaches 384 for FY 2026-27.

However, CII availability does not automatically mean indexation can be claimed. Since 23 July 2024, indexation has generally been removed, with specific grandfathering for qualifying land and buildings acquired before that date by resident individuals and HUFs.

Last reviewed: October 2026

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