To calculate long-term capital gains resulting from the sale of immovable property, securities, and jewellery, the Income Tax Department announced the cost inflation index (CII) for the current fiscal year on Wednesday. This was done to comply with the requirements of the current budget. The Cost Inflation Index for the fiscal year 2022-23 that applies to the academic year 2023-24 is 331.
A taxpayer will use the capital gains index, after adjusting for the impacts of inflation, to assess the amount of gain that resulted from the sale of capital assets. This gain will be subject to taxation. According to AMRG & Associates Senior Partner Rajat Mohan, the CII will assist taxpayers in the computation of long-term capital gains tax, which will enable taxpayers to timely send advance tax payments.
Mohan further stated, “over the past couple of years, the inflation index has been rising at a higher rate, which portrays the mounting inflation in the country.” Yeeshu Sehgal, the global head of tax markets for AKM, stated that the CII would be favourable to taxpayers since assets that are held for long periods will be recorded at purchase cost despite rising inflation.
According to Sehgal, “it is crucial to adjust the abovementioned purchase cost with the new cost inflation index notified as 331 because it allows for the capital gains tax to be calculated reasonably and fairly.” This is because the adjustment makes it possible for the capital gains tax to be calculated reasonably and fairly. A yearly notification of the Cost Inflation Index, or CII for short, is mandated by the Income Tax Act of 1961. CII is also known as the Cost Inflation Index. It is usual practice to compute what is known as the “indexed cost of acquisition” when assessing the number of capital gains that must be taken following the sale of any capital asset. This is done to determine the number of capital gains that must be taken.
For an investment to be eligible for long-term capital gains, the asset must have been held for over 36 months (24 months for immovable property and unlisted shares and 12 months for listed securities). The Consumer Price Index (CPI) is utilised to determine the inflation-adjusted purchasing price of assets to compute taxable long-term capital gains. This is done since the prices of products tend to increase over time, which results in a decline in purchasing power (LTCG).
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