Friday, June 24, 2022

IT Department notifies cost inflation index for current fiscal

IT Department has notified the cost inflation index for the current fiscal to calculate long-term capital gains arising from the sale of immovable property, securities and jewellery

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New Delhi: The Income Tax (IT) Department has notified the cost inflation index for the current fiscal to calculate long-term capital gains arising from the sale of immovable property, securities and jewellery. The cost inflation index (CII) is used by a taxpayer to compute gains arising out of the sale of capital assets after adjusting for inflation. The Cost Inflation Index for FY 2022-23 relevant to FY 2023-24 is 331.

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

“For the last couple of years, the inflation index has been rising faster, which depicts the mounting inflation in the country,” Mohan added.

AKM Global Head of Tax Markets Yeeshu Sehgal said the CII will be beneficial to taxpayers as assets, which are held for long-term, are recorded at purchase cost despite increasing inflation

“It is very important to adjust the said purchase cost with the new cost inflation index notified as 331 due to which the capital gains tax can be reasonably and fairly calculated,” Sehgal said.

CII or Cost Inflation Index is notified under the Income-tax Act, 1961, every year. It is popularly used to calculate the “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 the 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 to compute taxable long-term capital gains (LTCG).

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