Income Tax Department sets FY25 Cost Inflation Index at 363
What's the story
The Income Tax Department has released the Cost Inflation Index (CII) for the fiscal year (FY) beginning in April 2024.
This index is utilized by taxpayers to calculate gains from the sale of capital assets, like immovable property, securities, and jewelry, after adjusting for inflation.
The Central Board of Direct Taxes (CBDT) has set the CII at 363 for the financial year 2024-25, relevant to the assessment year 2025-26.
The CII number for FY2023-24 was 348, and 331 for FY2022-23.
Inflation indicator
CII reflects economic inflation and assists in tax rebates
The CII reflects economic inflation, which leads to an increase in the prices of goods and services over time, as per Moore Singhi Executive Director Rajat Mohan.
"This is consistent with the retail inflation rate of 4.83% recorded in April 2024," Mohan said.
He further stated that taxpayers generally prefer a higher CII as it allows them to claim larger tax rebates.
Tax liability reduction
It aids in adjusting capital gains for inflation
The CII is useful in adjusting capital gains for inflation, as stated by AKM Global Partner-Tax Sandeep Sehgal.
"Taxpayers can use this to calculate gains for long-term capital assets sold during FY 24-25 and reduce the tax liability accordingly," Sehgal said.
The index of FY24-25 has been updated to 363, marking a rise of 15 points, which corresponds to an annual inflation rate of approximately 4.3%.