Saturday, May 18, 2024

Income Tax Department notifies Cost Inflation Index for current fiscal

Representational image only.

Representational image only.
| Photo Credit: Twitter/@IncomeTaxIndia

The Income Tax Department has notified the Cost Inflation Index for the current fiscal beginning April 2023, for calculating long-term capital gains arising from sale of immovable property, securities and jewellery.

The Cost Inflation Index (CII) is used by taxpayers to compute gains arising out of sale of capital assets after adjusting inflation.

The Cost Inflation Index for FY 2023-24 relevant to AY 2024-25 stood at 348, as per a notification of the Central Board of Direct Taxes (CBDT). Usually, the Income Tax Department notifies CII in the month of June. The CII number for last fiscal was 331 and for 2021-22 financial year it was 317.

AMRG & Associates Senior Partner Rajat Mohan said the CII would help taxpayers to compute long-term capital gains tax enabling them to remit advance tax on time.

“This year’s cost of inflation index is notified three months earlier by the Tax Department as compared to last fiscal year. Taxpayers can now precisely and accurately compute tax on long-term gains in the first quarter of FY 2023-24 and pay the necessary advance tax,” Mr. Mohan added.

CII or Cost Inflation Index is notified under the Income-Tax Act, 1961 every year. It is popularly used to calculate “indexed cost of acquisition” while calculating capital gains at the time of sale of any capital asset.

Normally, an asset is required 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’.

Since prices of goods increase over time resulting in a fall in the purchasing power, the CII is used to arrive at the inflation adjusted purchasing price of assets so as to compute taxable long-term capital gains (LTCG).

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