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Indexed Cost of Acquisition or Improvement

Raise the cost of a long-term asset by the Cost Inflation Index (CII) under section 48, with the Finance Act 2024 rules on when indexation still applies.

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Whether asset is transferred on or after 23/07/2024?
Asset acquired on or before base year (2001-02)?
Whether asset is received without consideration from previous owner?

Cost Inflation Index (CII) for the year in which

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Still needed: the cost of acquisition.

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For guidance only — not tax advice. Every figure is drawn from BharatX’s verified rule book, with the sections and rules shown alongside it.

Indexed cost of acquisition: how it works and FAQs

FY 2025-26 (Income-tax Act 1961) and FY 2026-27 (Income-tax Act 2025) · Updated

How it works

The indexed cost of acquisition raises the cost of a long-term asset by the Cost Inflation Index (CII): indexed cost = cost × CII of the year of transfer ÷ CII of the base year (or the year the asset was first held).

The indexed cost of acquisition raises the cost of a long-term asset by the Cost Inflation Index (CII): indexed cost = cost × CII of the year of transfer ÷ CII of the base year (or the year the asset was first held). From 23 July 2024 (Finance Act 2024) indexation is withdrawn, except a resident individual or HUF transferring land or building acquired before that date may still use it.

  1. Work out the notional cost: the actual cost of acquisition or improvement — or, if the asset was acquired on or before 2001-02, the higher of that cost and the fair market value on 1 April 2001.
  2. Indexed cost = round(notional cost × CII of the year of transfer ÷ CII of the base year or year first held) (section 48).
  3. For a transfer on or after 23 July 2024, indexation is not available — the plain cost is used — unless it is land or building acquired before that date by a resident individual or HUF.
  4. The CII of the year of transfer cannot be below the CII of the base year.

Worked example

Indexed cost of acquisition = ₹3,63,000.

An asset acquired after 2001-02 at a cost of ₹1,00,000 is sold in a year whose CII is 363; the CII of the year it was first held is 100.

  1. Notional cost = ₹1,00,000.
  2. Indexed cost = 363 ÷ 100 × 1,00,000.

Indexed cost of acquisition = ₹3,63,000.

Frequently asked questions

How is the indexed cost of acquisition calculated?

Indexed cost = cost of acquisition × CII of the year of transfer ÷ CII of the base year or the year the asset was first held, under section 48.

Is indexation still available after 23 July 2024?

Finance Act 2024 withdrew indexation for transfers on or after 23 July 2024, except that a resident individual or HUF transferring land or building acquired before that date may still choose indexation.

What cost is used if the asset was acquired before 2001-02?

You may take the fair market value as on 1 April 2001 or the actual cost, whichever is higher, as the cost of acquisition.

What is the Cost Inflation Index (CII)?

A number notified each year by the government that measures inflation; it is used to index the cost of a long-term asset so only the real gain is taxed.

Every figure the calculator shows lists the sections it relies on under “Legal basis”. For guidance only — not tax advice.