Indexed Cost of Acquisition

Learn about the indexed cost of acquisition, its meaning, formula, and benefits in capital gains taxation.
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4 min
18-Feb-2025

Taxes on long-term investments can feel overwhelming, especially when inflation eats into your real profits. The indexed cost of acquisition is designed to ease this burden by adjusting the original purchase price of an asset to account for inflation. This ensures you’re taxed only on your actual gains, not on inflation-driven increases in value.

For long-term investors, understanding indexation is key to effective tax planning—and pairing it with safe options like Bajaj Finance Fixed Deposits (FDs) ensures a well-balanced portfolio. Check rates.

How to calculate cost of acquisition with indexation

The process of calculating indexed cost may sound technical, but it follows a straightforward formula:

Indexed Cost of Acquisition = (Original Cost × CII of Sale Year) ÷ CII of Purchase Year

Steps to follow:

  1. Identify the original purchase cost of the asset.

  2. Note the Cost Inflation Index (CII) of the year of purchase and the year of sale.

  3. Apply the formula to arrive at the indexed cost.

Fixed Deposit

  1. Trusted by over 5 lakh customers
  2. Fixed Deposits worth more than Rs. 50,000 crore booked
  3. Rated CRISIL AAA/STABLE and [ICRA]AAA(STABLE)
  4. Up to 0.35% p.a. extra interest offered for senior citizens
  5. Flexible interest payout options available - Monthly, Quarterly, Half-yearly, Annually or at Maturity

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Uniform allowance exemption under the new tax regime

Under the new tax regime, uniform allowance exemptions are not available. This means the entire allowance becomes taxable. Here’s what you need to know:

  • All special allowances, including uniform allowance, are removed.

  • Employees must include the full amount in taxable income.

  • Lower tax rates are available, but deductions and exemptions are limited.

  • To claim uniform allowance exemption, employees must stick to the old tax regime.

Unlike allowances that vary with tax regimes, FD returns remain unaffected by tax structure. Bajaj Finance FD ensures stability in your earnings regardless of policy changes. Open FD.

Calculation of uniform allowance

The calculation of uniform allowance depends on actual expenses and the amount received.

  • Employers grant a fixed allowance, based on job roles and sector.

  • Employees must maintain proof of expenses (bills/receipts).

  • Under the old tax regime, exemption = lower of actual expenses incurred or allowance received.

  • Any unspent portion is added back to taxable salary.

If you save money from allowances or salary, investing in a Bajaj Finance FD helps you compound your savings with flexible tenures from 12 to 60 months. Invest now, start with just Rs. 15,000.

Fixed deposit variants

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Fixed Deposit - 60 Months

INTEREST RATES UP TO
7.30% p.a.
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Fixed Deposit - Senior Citizen

INTEREST RATES UP TO
7.30% p.a.
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Fixed Deposit - Age below 60

INTEREST RATES UP TO
6.95% p.a.
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Fixed Deposit - Minor

INTEREST RATES UP TO
6.95% p.a.
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Fixed Deposit - HUF

INTEREST RATES UP TO
6.95% p.a.
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Fixed Deposit - Sole Proprietor

INTEREST RATES UP TO
6.95% p.a.
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Also Read: Salary and Allowances

Conclusion

Uniform allowance is a valuable benefit for employees in uniformed jobs, helping them offset work-related expenses. However, exemption is available only under the old tax regime, while the new regime makes the full amount taxable. Employees must weigh their total income, deductions, and tax liability before choosing a regime.

For building wealth beyond allowances, consider Bajaj Finance FD. With AAA safety ratings, competitive interest rates, and flexible payout options, it’s a smarter way to grow your hard-earned money with confidence. Check eligibility.

Calculate your expected investment returns with the help of our investment calculators.

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Conclusion

The indexed cost of acquisition is a powerful tax-saving tool that adjusts your asset’s purchase price for inflation, ensuring you’re taxed fairly on actual profits. While it benefits long-term capital assets like property or bonds, you can further secure your financial future with safer avenues.

Choosing Bajaj Finance FD gives you assured returns, flexible tenures, and the highest safety ratings, making it a perfect complement to tax-efficient investments. Check out latest FD rates.

Calculate your expected investment returns with the help of our investment calculators

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FAQ

What makes Bajaj Finance FD safe for long-term savings?

Bajaj Finance FDs are rated CRISIL AAA/Stable and [ICRA]AAA(Stable), the highest safety ratings. This means your money is well-protected, and you can count on assured payouts at maturity. Check out latest rates.

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Disclaimer

As regards deposit taking activity of Bajaj Finance Ltd (BFL), the viewers may refer to the advertisement in the Indian Express (Mumbai Edition) and Loksatta (Pune Edition) furnished in the application form for soliciting public deposits or referhttps://www.bajajfinserv.in/fixed-deposit-archivesThe company is having a valid Certificate of Registration dated March 5, 1998 issued by the Reserve Bank of India under section 45 IA of the Reserve Bank of India Act, 1934. However, the RBI does not accept any responsibility or guarantee about the present position as to the financial soundness of the company or for the correctness of any of the statements or representations made or opinions expressed by the company and for repayment of deposits/discharge of the liabilities by the company.

For theFD calculatorthe actual returns may vary slightly if the Fixed Deposit tenure includes a leap year.

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