Cost Inflation Index table upto 2013-14-Complete guide on CII and some FAQ’s

Cost Inflation Index table upto 2013-14-Complete guide on CII and some FAQ’s

Cost Inflation index / table (CII) would be useful for you to compute the long term capital gains in India. Hence it is important for us to understand what is Cost Inflation Index and Indexation table which is provided by Govt. of India from 1980 onwards. In this article, I would provide Indexation Table from 1980 to 2014, about the cost inflation index, assets to which this indexation chart can be  used and some of the FAQ’s about using this Cost inflation index chart.

What is Cost Inflation Index?

Cost Inflation Index is the measure of inflation that is used for computing long term capital gain on sale of capital assets. Section 48 of the Income tax defines this. This Cost inflation table is provided every year. If you have sold any eligible long term capital assets in any financial year, you need to pay income tax on such long term capital assets after computing Indexation cost of such assets.

Indexation Chart / Table upto 2013-14

Financial Year CII Index Real Inflation and 75% of it Real inflation % of CII Increase 75%
Last 3 years CII
2011-12 785 74=10.41% 13.88%
2012-13 852 67 = 8.54% 11.38%
2013-14 939 87 =10.21% 13.62%
Historical data
1981-1982 100
1982-1983 109 9 = 9% 12%
1983-1984 116 7= 6.422 8.56%
1984-1985 125 9=7.7586 10.34%
1985-1986 133 8=6.4 8.53%
1986-1987 140 7=5.263 7.02%
1987-1988 150 10=7.1428% 9.52%
1988-1989 161 11=7.333% 9.78%
1989-1990 172 11=6.8323% 9.11%
1990-1991 182 10=5.8139% 7.75%
1991-1992 199 17=9.340% 12.45%
1992-1993 223 24=12.060% 16.08%
1993-1994 244 21=9.4170% 12.56%
1994-1995 259 15=6.1475% 8.20%
1995-1996 281 22=8.494% 11.33%
1996-1997 305 24=8.5409% 11.39%
1997-1998 331 26=7.8549% 10.47%
1998-1999 351 20=6.0423% 8.06%
1999-2000 389 38=10.826% 14.44%
2000-2001 406 17=4.370% 5.83%
2001-2002 426 20=4.926% 6.57%
2002-2003 447 21=4.93% 6.57%
2003-2004 463 16=3.58% 4.77%
2004-2005 480 17=3.67% 4.90%
2005-2006 497 17=3.54% 4.72%
2006-2007 519 22=4.43% 5.90%
2007-2008 551 32=6.17% 8.22%
2008-2009 582 31=5.62% 7.50%
2009-2010 632 50=8.60% 11.46%
2010-2011 711 79=12.36% 16.49%
2011-12 785 74=10.41% 13.88%
2012-13 852 67 = 8.54% 11.38%
2013-14 939 87 =10.21% 13.62%

How to compute Long Term Capital Gains using this indexation table?

Let me explain with an example about computing LTCG using this CII table. Ms. Apoorva has purchased an asset for Rs 100,000 in Mar-2010 (Financial year 2009-10) and sold the same in Jul-2013 (Financial year 2013-14). CII index for 2009-10 is 632 and 2013-14 is 935 as per above index chart.

Indexed cost = Actual cost x Cost of index in the year of sale

————————————

Cost of index on year of purchase

Indexed cost = Rs 100,000 x 939 / 632 = Rs 148,575

Capital gain = Rs 120,000 minus Rs 148,575 = 0 (indexed cost is more than the price at which it was sold)

What are the Long term Capital assets to which this cost inflation index is applied?

Indexed cost can be computed only for long term capital assets which are eligible for income tax exemption. This depends on the nature of the assets.

1) Stocks or Mutual funds <= 12 months – Short term capital asset

2) Stocks or Mutual funds > 12 months – Long term capital asset

3) Other assets <=36 months – Short term capital asset

4) Other assets >36 months – Long term capital asset

Who provides cost inflation index data?

Cost inflation index is provided by Central Board of Direct Taxes (CBDT) every year.

Is there any basis on how the cost inflation index computed?

Yes. The cost inflation index is computed by considering 75% of real inflation. E.g.

1) CII for Financial year 2011-12 is 711

2) Real Inflation for 2012-13 is 13.875%

3) 75% of real inflation of 13.875% would be 10.44%.

4) Cost inflation index for 2012-13 would be Previous year, CII + 75% of real inflation of that year i.e. 711 + 74

5) CII for 2012-13 is 785

What is covered as part of long term capital assets?

Stocks, Mutual funds, Real Estate, Gold, Fixed Maturity Plans (FMP) etc.

What are NOT covered as part of long term capital assets?

Any fixed income return instruments such as Fixed deposits, returns from Recurring deposits, Post office Saving Schemes

Some FAQ’s on using indexation table

1) I have sold some mutual funds, can I use this indexation table?

Yes, you can use it. However, equity mutual funds are tax free if you sell after 1 year. For non equity funds, you can use this indexation table to compute long term capital gains which are sold after 12 months. You can refer the article on taxation on mutual fund returns.

2) I have some income from my Savings Bank account, can I use this table?

Since it is fixed income instrument, you cannot use indexation table for indexation purpose.

3) I have Non-Convertible Debenture (NCD) where I get interest. I am treating such interest as income and paying income tax. However, last year, I sold it on a stock exchange and made some profit (Rs 1,000 is bond price and I sold at Rs 1,500 per bond), how to treat it?

• While short term capital gains on sale of NCDs would be taxed at normal rates, long term capital gains on sale of NCD (a listed security) are taxed at concessional rates u/s 112 of IT Act.
• Long term capital gains on listed securities, are taxed at the rate of 10% without indexation or 20% with indexation whichever is lower. However, as the benefit of cost indexation is not available in case of bonds and debentures; therefore, long term capital gains from NCDs are always taxable @ 10.30 per cent (including education cess of 3%) without indexation.  (Source: Moneycontrol.com)

4) Indexed cost of acquisition is higher than the actual cost, can I claim any exemption from income tax

Indexed cost of acquisition is computed to arrive the long term capital gain and income tax thereon. You cannot compute it and get any special exemption in case your indexed cost is higher than the actual cost of purchase.

5) What about assets purchased prior to 1980?

Any properties purchased prior to 1980, you need to take fair market value of considering the long term capital gain.

6) Yes, I used this table and computed long term capital gain, but is there any way, I can save tax?

If you have a long term capital gain on his property, there are ways to save income tax. You can refer our popular article on saving income tax on LTCG on house property.

7) I brought Shares through Employee Stock Option Plan (ESOP). Are there any specific exemptions for ESOP?

At present, benefits derived from Esops are taxed as perquisites and form part of salary income. The perquisite value is computed as the difference between the Fair Market Value (FMV) of the share on the date of exercise and the exercise price. There are specific valuation rules prescribed for listed and unlisted companies in order to determine the FMV. An employer is required to deduct tax (TDS) in respect of any tax liability arising from perquisites (Source: Business-Standard.com).

8) I purchased stocks through IPO, is there any specific treatment for this?

Recently I have realized I made a blunder mistake here. I applied for a Repco Home Finance IPO last year in Mar-2013 and I have been allotted shares. I made more than 100% profit and last two weeks back, in Apr-2014 I sold them thinking that it would fall under the long term capital gain (> 1 year) and need not pay tax. The next day I realized that I made a mistake. While I have applied in Mar-2013, the IPO shares were allotted somewhere in May/Jun-2013. Means the shares I sold are less than 1 year and I need to pay Short Term capital gains tax. You should check the allotment date Vs your sale date for arriving whether it is a short term capital gain or long term capital gain.  I need to pay tax on small mistake I did 🙁

Conclusion: Understanding about Cost Inflation Index would help you to do better tax planning. Understand the acquisition date, acquision price, indexed cost of acquisition and date of sale is key to determine long term capital gain and do tax planning.

Have you ever used cost inflation index table to derive LTCG? Have you made any mistakes like what I did on the IPO? What did you do after that ?

Suresh

Cost Inflation Index table upto 2013-14-Complete guide on CII and some FAQ’s

One comment

• J G Nagwani

Dear Mr Suresh,
My wife purchased property in 1987 for Rs 67,000/-.For this we took loan from HDFC. Inaddition to principle we paid interestat 12-13% also. We bought additional items along with property, extra work and extra land etc worth Rs 55,,000/-..Further 1995 we constructed First floor at cost of Rs 3,50,000/-.
Please help us in calculating present cost. Further are we entitled to add interest to cost of house.(1986 to 1995).

Best Regards
Nagwani