CBDT on 7th June 2017 announced the Cost of Inflation Index for FY 2017-18 (AY 2018-19). The biggest change this year is that the base year was changed from the earlier FY 1981-82 to FY 2001-02.
What is Cost of Inflation Index (CII)?
It is a measure of inflation that is used for computing Long Term Capital Gains (LTCG) on the sale of capital assets as per IT Section.48.
It is announced for each Financial Year but not based on Assessment Year. Hence, the applicable rate of CII will be for that particular financial year.
To arrive at a capital gain, it is very much important to calculate the LTCG. For this purpose Cost of Inflation Index is a must.
Take an example of how the indexed cost of acquisition will be calculated using Cost of Inflation Index or CII.
The formula is as below.
Indexed Cost of Acquisition=(Cost of Acquisition/Cost of Inflation Index (CII) for the year in which the asset was first held by the assessee OR FY 2001-02, whichever is later)* Cost of the Inflation Index (CII) for the year in which the asset was sold or transferred.
Let us assume that you purchased the property in FY 2005-06 at Rs.50 lakh and sold the same in FY 2017-18 at Rs.1.5 Cr. Now the indexed cost of acquisition will be as per above formula i.e.
Indexed Cost of Acquisition=(Rs.50 lakh/117)*272=Rs.1,16,23,931. So the Long Term Capital Gain=Selling Price-Indexed Cost of buying property=Rs.33,76,069.
(Note-As per the below Cost of Inflation Index (CII), the CII rate for FY 2017-18 is 272 and for FY 2005-06, it is 117).
However, if you do not consider the indexed cost, then in plain the gain may be said as Rs.1 Cr lakh (Rs.1.5 Cr-Rs.50 Lakh). But in the case of taxation, the LTCG on capital assets will be after adjusted the cost of buying to inflation or Cost of Inflation Index (CII).
Hope you understood the concept and importance of Cost of Inflation Index (CII). Below is the chart showing the Cost of Inflation Index (CII) from the changed base year FY 2001-02 to FY 2017-18.
What is the Cost of Inflation Index for FY 2017-18 or CII with base year 2001-02?
Below is the complete list of Cost of Inflation Index for FY 2017-18 from new base year FY 2001-02 to FY 2017-18.
Hope this information will be helpful for you in arriving at your capital gain tax.
95 Responses
Dear sir, I inherited a property in 2014 after the death of my father, who owned it since 1946. I sold it in 2018. How should I calculate the LTCG? The cost of acquisition is not known. regards
Dear Jain,
Refer above formula properly.
By the stroke of a pen the new government changed the base year for calculating cost inflation index based capital gain and increased the amount of capital gain liable for tax by several notches for persons who bought capital assets like land & building many years before the new base year. Discrimination of high order also, because whether you bought an asset in 81-82 or 2000-01 the cost is same!! How to fight such unfair change?
Dear Bhat,
Thanks for sharing your views and I can understand your concerns.
I have been informed by CAMS that for debt mutual funds redeemed during April and May 2017, the old cost inflation table is applicable for îndexation and only for units redeemed after June 2017, the new îndexation table with 2001 as base is applicable. They say the government order is dated June 2017. Are they correct?
Dear Ajit,
Let them share that notification with you and you can also share the same with me, then we discuss.
I have sold a residential land in May 2018 recently which was purchased in Nov 2010. For capital gain CII, I need the index applicable for the FY 2018-19. But the published data has only till FY 2017-18. What do I do and when we can expect the index to be released by Government? Thanks
Dear Viswanathan,
I think they publish soon.
Sir,i purchased a land in 1994 and sold it in feb 2018.what will be the cii for 1994 and 2018?
Ravinder-Refer above post properly. The base year now changed and accordingly, you have to consider the index.
if don’t mind , clarify /give me one good reason, why my posted Reply, for the common good and creating an awareness among your readers, instantly displayed, has since been deleted.
Vaswami-Can you point out or share again which of your comment deleted??
sorry, not pre4served but remember to have mentioned the fact that the several areas of controversy, despite drawn attention of the CBDT to, have remained to be clarified, till date.
Also, supplied the LInk to my last Updated Post on Linkedin.
Vswami-Then remember of what you commented and let me know that.
I sold a shop for Rs.1100000/- in FY 2017-18 which was acquired by me under will of my father. Father had purchased in 1987 for Rs. 50000/-. Kindly tell me tax liability.
Gupta-Refer my above formula to arrive at capital gain.
Hello sir,
I have a one question about loan which is repay by selling house for rs. 6lacs via cheuqe which had purchased for rs. 40000 in Aug 2008 and sell them in 2018 .
So my question is this loan is allowed under sec 80c ? What about interest and client now a days no filling return so he was not taken any deduction earlier for principal amount and interest .
Riddhi-If it is a homeloan then the principal paid during the current financial year can be claimed for deduction under the CURRENT FY using Sec.80C deduction. Same way, interest also can be claimed for deduction of up to Rs.2,00,000 under Sec.24.
How would I determine the selling cost of my house, should it be DLC or rough estimate, whereas DLC rate never meet to actual selling cost.
Sanjay-Selling cost is the sale deed cost.
It is very good article to understand the concept of indexation & LTCG. Thanks from my side.
I have one question:
If a property is sold in FY 2017-18, what is the applicable CII ?
I am selling a plot of value 11 lakh in February 2018 (FY 2017-18). I have bought in October 2011 (FY 2011-12) in 4.83 Lakh. I have invested 65,000 Rs. (in FY 2013-14) in maintenance or boundary wall of plot.
Please let me know the CII applicable as per old rates of CII, nor the new rates of CII ?
Also, what will be my indexed cost of plot to calculate the capital gain?
If you can answer I will be grateful.
Abhishek-The applicable new CII for you is FY 2017-18 ONLY.
I was working in a bank. I availed a housing loan in 1983-84 for construction of house and in the years following I applied for loans for construction of first floor, the last loan availed in 1998-99.(Financial years). My total loans availed during this period is roughly Rupees 5 lakhs. I want to sell this property. How am I to calculate capital gains. Should I take Rs.5 lakhs with base as 2000-01 or calculate it based on 1981 as base. If the latter is the case, cost indexation has
not been published with base 1981. The last cost indexation based on old formula is 1125 AY 2016-17.
I would be thankful if you could answer my query.
Once again thanks and regards.
FROM ; R. SANKARA RAMAN, CHENNAI – 600 044.
Sankara-You have to use the current base year index of 2000-01.
i purchased a govt. flat on june’ 1993 at a price of rs. 374800/- then sold in sept’ 2017 at rs.2900000/- i incurred expenditures towards improvement of rs.60500/- in 2010-11 (F.Y.), paid brokerage rs.51000/-, rs. 29000/- to housing society for NOC in connection with transfer, paid maintenance charges from 1996 to 2017 of rs.92400/- and property tax to corporation of rs. 8800/- would you kindly calculate the LTCG Tax to be paid during the FY 2017-18 ? Thank you.
Purnendu-Sorry it is hard for me to calculate each individual.
Can we use Long term capital gain for the marriage of daughter? Or illness
Lekhraj-I am not sure of what you are asking.
No you can not use it for illness or daughter`s marriage.
Hi Sir, if I sell a property bought in 1993, in 2017, and not able to find out the FMV for 2001, then what indexation index should I apply,Considering 1981 as the Base year. Or is it mandatory to find out the FMV as on 2001.
Thanks
Nisha Gangurde
Nisha-How you purchased that without sale deed or any other documentation?
Sorry I did not understand your question. It was purchased with a sale deed. But how u calculate FMV for 2001.
Nisha-Refer above formula. Where it comes to FMV?
As per ur article, if property purchased before 2001 and sold post 2001, the indexed cost of acquisition is calculated basis the FMV of property in 2001. I want to understand how do you take out Fair Markey Value of property in 2001. Do you have to go municipal or any other government organization for that.
Nisha-Refer below formula.
Indexed Cost of Acquisition=(Cost of Acquisition/Cost of Inflation Index (CII) for the year in which the asset was first held by the assessee OR FY 2001-02, whichever is later)* Cost of the Inflation Index (CII) for the year in which the asset was sold or transferred.
Bhai agar tax maloom nahi hai tho bol de nahi maloom hai. Without having sufficient knowledge you shouldn’t have written the article, though i commend the efforts taken.
Abdul-I am not here to spoon feed all. If you need knowledge, then you must also take a pain to at least read. Rest you or readers have to decide whether I have a knowledge or not.
Its necessary to calculate fair market value. Either it can be done through sales record of registration office or consult an approved valuer.
Sir,
Thanks for your quick response. ore specifically I would like to know if
1) I can claim the penalty paid as expense
2) At time of purchase,the registration and stamp duties are to be included as part of acquisition cost before applying the inflation index?
Iyer-1) PENALTY of?
2) Refer this TUTORIAL OF IT Dept.
Sir,
It’s the penalty levied by the Stamp Office on the agreement between builder and first buyer where the agreement value mentioned was less and hence stamp duty paid was also less. After valuation the Stamp Office levied a penalty. My question was can I claim this as an expense?
Iyer-In my view NO. Because it is the error in calculating the stamp duty by you.
Sir,
Have a query on LT Capital Gains Tax on sale of House. I recently sold my flat after purchased in 1999 and had to pay Stamp duty of around Rs. 12000/- while retrieving the agreement document of earlier buyer and builder executed in 1996. I had paid full stamp duty in 1999 while buying from the seller. I also had to pay penalty despite the stamp office in Maharashtra not sending me any demand notice. Can I claim these expenses as part of the cost while arriving at the Capital Gains made after taking into account the indexed cost of acquisition? Would appreciate your guidance an advice.
Iyer-Yes, you have to include all such stamp and registration cost while calculating the cost of acquisition.
Sir,
I had purchased a flat in 1999 at a cost of Rs.5.32 Lacs and now sold it in 2017 for Rs. 58.60 Lacs. Based on the new CII for 2017 my LT Cap gains Tax liability would work to around 8.8 Lacs with indexation benefits. Can I save on paying Tax by investing partially in sec 54 Bonds since I have no intention of investing in real estate.
Iyer-Yes, by investing in capital gain bonds, you can save tax.
Dear sir,
Please give some example of LTCG calculation for property purchase before 2001-2002 and sold in 2017-18 and oblige
Ashok-Refer above formula properly.
Dear sir,
I have purchased a residential flat in year 1995-96 in 7Lacs and sold it in2017-2018 in 75Lacs in Pune.How I calculate long term capital gain and how can I save it and how much amount to invest in buying residential property.
Ashok-I explained about how to calculate. Saving tax involves two ways, one to purchase property and second to invest in bonds meant for this.
Hello,
We had land in the name of family 7 heirs (purchased for approx. Rs. 20,000 in 1968).
We have entered into development contract in Feb-2004 with a builder. At the time of contract my share works out to market value Rs, 17,11,928 (value of land as per challan for contract reg.)
I got possession of flat in Aug 2010 (free of cost) but market value is Rs. 460,500 (as per challan for contract reg.).
Now, I sold flat in Sep-2017 for Rs. 79,00,000. Can you tell me what is my LTCG?
Is it to be calculated basis (1) value of land in Feb-2004 or (2) value of flat in Aug-2010?
As per (2) value of flat in Aug-2010, ICOA = (460,500 / 167) * 272 = 7,50,035. LTCG = 79 lacs – 7.5 lacs = 71.5 lacs.
Is this correct?
Patel-As per 2010.
Sir,
To save Capital gain tax , instead of buying property against realized value, can i invest proceeds in NHAI or similar bonds where lock in is for 3 years. And for such bonds are the proceeds after 3 yrs completely ta free.
Any other better option to save on CGT.
Pls advice.
Thanks
Sudhir-Yes, you can save the capital gains tax by investing in Capital Gains Bonds. However, the interest income from such bonds is taxed as per your tax slab.
Please let me know whether indexation is a must for AY2018-19 for Long term Capital Gain, for sale of property.
OR can we pay tax without indexing the value. What will be the tax rate when value is indexed or NOT Indexed.
The site which was purchased during 2003 at around one lakh was sold during this FY at a cost of around 3000000/-
cm muralidhara
Muralidhara-In your case it is MUST and this applies to all capital gains where indexation applies.
sir, what is the index cost of inflation for current year ?
Anand-This for current AY and last FY.
Sir I have a inherited property which was purchased by by grandfather in the year 1923 for Rs 1800.
Now in 2017-2018 the property is getting sold for Rs. 94 lacs. How to calculate LTCG. How can i calculate cost of improvement and all?? I don’t have any bills as the improvement charges were made and paid by my grandfather and that was even before my birth. Can i use a random value as cost of acquisition?? or fair market value for the year 2001.or circle rate.
Akash-You must dig it because for you the cost to the previous owner is considered as the cost of acquisition of the Property.
I purchased land for Rs 50000 in 1995-96 and I have sold this recently in August 2017. What happens to inflation between 1995-96 and 2001-02? Why should Income tax payers lose out on inflation? Are there are other provisions that can be used to not lose this benefit
Ramadesikan-This is made as per the inflation rate. You have to follow the rules.
Sir, I purchased one apartment in 1999 and another in 2007. I am selling both now and acquiring a new apartment with the proceeds. The cost of the new apartment is lower than the combined sale value of both. Can the combined capital gains be offset against the cost of the new property? In other words, if the total capital gains calculated on sale of both properties is less than the cost of the new one, will there be CG tax payable?
Hariharan-Each transaction (sale) has to be treated separately and accordingly taxed. However, if you are investing new property, then there will not be tax liability to the extent of the money you re-invested. Refer IT INFORMATION.
Dear Basavaraj Sir,
Flat was purchased in 1990 for Rs. 50,125/-, and will be selling in 2017-18 at Rs. 19L. As base year value has changed , i had to hire a Valuer and find out fair market value of my flat. Therefore indexed cost = 4,39,500 ( FMV on year 2001 as per Valuer ) X 272 / 100 = 11,95,440. LTCG = 7,04,560/-. Tax of 20.6% will be 1,45,139. Cost of improvement taken as nil. So is the formula correct i?. I was unaware of valuers doing this job and gradually learned about this process. The capital gain value also seems to have gone down significantly which other wise would have been 3lakh plus. Many thanks in advance.
i have purchased property in 1991 92 for total invest ment of rs 11lacks kindly inform me lgcg tax would apply new capital aqution table of 2000 /2001 base cost of index 100 1nd 2017 272 i am planning to sell for 1 crore kionly inform me what will be capital gain
Padmanabhan-I have given an example. Please do calculate the same. It is hard for me to calculate for each individual.
I saw the cost Inflation Index to be 1125 for Financial year 2016-17 on various platforms online. https://www.bankbazaar.com/tax/cost-inflation-index.html Could you please explain to me which one is correct? And what do I apply to calculate my L.T. Capital gain for this year? Also what do I need to do incase I do not have any proof of all the improvements I have done to my property over the years? Can that amount not be added to Cost of Improvement?
Thank you.
Pranshu-If you are calculating CII for FY 2017-18, then you have to consider the above table.
Dear Sir,
My property is purchased in partnership in 2001 and is sold in 2017. Could you please advise if in a partnership firm too the rate of Long Term Capital Gain is 20% post indexation. And without indexation is it 10%.?
Vishal-I am expert in guiding an individuals but not FIRMS or COMPANIES. Better you check the same with your tax consultant or CA.
Ok no problem. Thank you.
Dear Sir, I purchased a residential property in 1985 for Rs.72,000/- and spent about 10 lakhs for improvement of the property (though I have no proof of spending money) from 1985 to 2017. Now I am going to sale the property for Rs.75,00,000/- . What would be the formula for applying CII for improvement cost. However I have understood the CII formula from 2001 to date . Kindly correct me.
Sudhir-Sale Value-Expenditure incurred for such transfer-Indexed Cost of Acquisition-Indexed Cost of Improvement. I explained how to calculate an indexed cost of acquisition. Regarding the indexed cost of the improvement, the formula is as below.
Indexed Cost of Improvement=(Cost of Improvement/CII for the year in which improvement took place)*CII for the year in which the asset is transferred.
I purchased a flat on 03.08.2010. The agreement value was Rs.49,93,100.00. I am selling this property during July 2017. The sale price is s.72,00,000.00. Will there be long term capital gains. If es what would be the capital gains tax, I will have to pay.
Raman-Please calculates the same using above formula. I can’t calculate the same for each individual.
Cost inflation index for the year 2017-18 as shown in new chart will be applicable from next year as I understand.The old chart does not show the value for this FY. Then how to compute long term tax from the old chart when property purchased before 2000 & being sold now?
Tushar-The CII has declared already from base FY 2001-02 to FY 2017-18, then what is your confusion?
Can the newly published table (perhaps not published by IT Dept.) be used for calculating LTCG for this FY please?
Tushar-It is published by IT Dept but not my own creation 🙂 Hence, you can use it.
I am not sure what kind of an expert you are ?! what you are saying is absolutely incorrect.
The property purchased before 2001-2002, the buyer has to enetr the Fair Market value. At the most conservative he can use the old indexation tables to reach the value till 2001 where the new chart takes over. Alternatively, he can render the services of a valuer and arrive at FMV for 2001-2002.
The new chart is to be applied to this FMV.
Please do not pose as an expert and give out wrong information
Rohit-Thanks for your EXPERT views 🙂 May I know how one can ENTER the FAIR MARKET VALUE? How one can arrive? Do you think there is a matching price movement as per the indexation table of IT Dept in reality?? I already explained what values we have to consider if the property was acquired before this indexation start year.
Basu,
I have a doubt. I have an inherited share from my Fathers property. Should I purchase a Residential Property or can I Purchase a land on the share I have received.
I don’t intend to construct a house on that land I purchase, its just for investment. Could you clarify.
Ajith-As far is investing in real estate is concerned, my answer is DON’T INVEST. Regarding stocks and mutual funds, without knowing the time horizon or the purpose of the investment, it is hard for me to guide.
purchased the property on 1991 for 145000 and sold in 2017-18 at 16000000 the LTCG turns out very huge if the base price is calculated with 100 as you mentioned
could you correct me
Ajith-Obviously, because the purchase price of just before 26 years is around Rs.1,45,000 and selling price is Rs.1.6 Cr. So as per this, you have to pay the tax by indexation calculation mentioned above.
Good morning, I tried to calculate on the basis of information & clarification given by you as under.Please correct me if i am wrong somewhere.
My assumptions are—Acquisition cost in FY 2012-13 is Rs.650000/- and say selling price in FY 2017-18 is Rs.3800000/-then Indexed cost of acquisition comes out to be Rs.884000/-and LTCG comes out to be Rs.2916000/-
Iam i right ?
Waghmare-Correct.
Thanks
I think there is some issue with the chart shared, as on other sites the chart shows different numbers from 2001- 2002 to 2016-2017.
Bhavesh-I cross checked again with CBDT Notification dated 5th June 2017. It is exactly same as that of what I shared above. You may be referring the old data where the base year was not the FY 2001-2002.
if you have purchased property in say 1989 then what index do you take for computing long term tax provided you sell now
Salil-If now the asset is purchased before FY 2001-02, then as per above formula, you have to consider the base year indexation rate of 100 and calculate the capital gain.
Sir, finance minister said in the budget but I think this is actually applying more tax. As per the new table, the max indexed cost will be 2.72 i.e. 272/100 (Purchase year 2001-2002 FY & Selling Year 2017-2018 FY. Now if someone purchased the property in 1981 at a very low cost, still the indexed cost will be only 2.72 times of purchased cost of 1981. This will imply huge capital gain tax.
As per the old chart, the base year was 1981-82 and the cost inflation index for 2016-17 was 1125 which means the indexed cost will be 11.25 times of purchased cost in 1981.
Am I wrong in my understanding?
Thanks
Ashish-I can understand that those who purchased assets before 2001-02 are under drawback as they have to cough more. But no option but to follow the rules right?