The price of inflation index (CII) for the monetary yr 2021-22 has been notified by the Ministry of Finance. The ministry has set the Value Inflation Index FY 202-22 as 317. For the earlier FY 2020-21, CII worth was 301.

The speed of inflation for indexation functions is specified by the Indian Authorities for each monetary yr.

The bottom yr is taken into account as 2001-02.

The bottom yr was shifted from 1981 to 2001 in Finances 2017.

This CII quantity is essential as it’s used to reach on the inflation adjusted buying worth of property (listed price of acquisition) which have been bought or deliberate to be bought in FY 2021-22.

The listed price of acquisition is used within the calculation of Lengthy-term capital features (LTCG) or Lengthy Time period Capital Losses (LTCL).

Kindly word that CII is used to calculate inflation-adjusted price just for these property the place inflation-adjusted (indexation profit) is allowed. For instance, within the instances of debt mutual funds, real-estate property, gold and many others.,

The CII worth can’t be used to reach at LTCG/LTCL on fairness mutual funds.  Index profit is not allowed in case of bonds or debentures besides capital indexation bonds or sovereign gold bonds issued by the RBI.

Newest Value Inflation Index FY 2021-22 | CII Chart AY 2022-23

Beneath is the desk of Value Inflation Index numbers, as stipulated by the Earnings Tax Division. You’ll be able to take values from the desk to compute the listed or inflation-adjusted price of acquisition.  

Methods to Calculate the Listed price of buy or listed price of Acquisition (ICoA)?

The listed price is calculated with the assistance of a desk of price inflation index as given above.

Divide the fee at which you bought the Property/Funding by the index as on the date of the acquisition. Multiply this by the index as on the date of sale.

ICoA = Unique price of acquisition * (CII of the yr of sale/CII of yr of buy)

Let’s say you will have invested in a debt fund in August 2014. Your funding quantity was Rs 2,00,000 (20,000 models @ Rs 10 every). Seven years later, you redeemed your investments in June 2021, at a worth of Rs 3,00,000 ( 20,000 models @ Rs 15 every).

Therefore, once you bought your investments, the worth of your investments was Rs 3,00,000. Your funding made capital features value Rs 1,00,000. Nevertheless, you needn’t pay tax on this whole quantity of Rs 1,00,000.

All you must do is apply the formulation.

• Value of acquisition is Rs 2 lakh.
• CII quantity for buy yr (2014-15) was 240.
• CII throughout sale yr (FY 2021-22) is 317.

This could imply that your listed price worth of acquisition could be –> (2,00,000 * 317/240) = Rs 2,64,167.

As once more, your Long run capital features would come all the way down to Rs. 35,833 (Rs 3,00,000- Rs.2,64,167), you’ll be taxed 20% of this quantity (as in comparison with Rs 1,00,000 with out indexation) which can once more, drastically scale back your tax obligations.

Thus, with Indexation, you’ll be able to get pleasure from the advantages of your personal investments with out dropping an extreme quantity of taxes.

CII Index Worth for FY 2021-22 / AY 2022-23 | Notification

Beneath is the notification issued by the Ministry of Finance on Value Inflation Index for FY 2021-22.

Proceed studying:

1. What’s Adverse Actual Curiosity Price? | How Can Curiosity Charges Be Adverse?
2. What’s Indexation of Mutual Funds and why is it essential for you?
3. Listing of all Widespread Funding Choices in India – Options & Snapshot
4. Methods to save Capital Features Tax on Sale of Land / Home Property?

(Publish first printed on 27-June-2021)