The Central Board of Direct Taxes (CBDT) has notified the Price Inflation Index (CII) at 384 for the monetary 12 months 2026-27, a key determine used to calculate inflation-adjusted capital positive aspects tax for eligible taxpayers. The index, notified below Part 72 of the Earnings-tax Act, 2025, will apply from April 1, 2026, for Tax 12 months 2026-27 and subsequent tax years.
The brand new index is increased than the 376 notified for FY2025-26, reflecting inflation over the previous 12 months. Whereas the annual notification is a routine train, it assumes larger significance after adjustments to the capital positive aspects tax regime introduced within the Union Price range 2024, which restricted the supply of indexation advantages for a lot of taxpayers.
What’s the Price Inflation Index (CII)?
The Price Inflation Index is a quantity notified yearly by the CBDT to account for inflation whereas calculating long-term capital positive aspects (LTCG).
As an alternative of taxing the complete distinction between the acquisition and sale value of an asset, indexation adjusts the acquisition price for inflation. This will increase the price of acquisition, thereby lowering the taxable capital achieve and, consequently, the tax legal responsibility.
For instance, if a property was bought a number of years in the past, its listed price can be increased than its precise buy value as a result of inflation is factored into the calculation.
Why has the CII elevated to 384?
The CII has been raised from 376 in FY2025-26 to 384 in FY2026-27, indicating a rise in inflation over the previous 12 months.
The next index means taxpayers eligible for indexation can declare a bigger inflation-adjusted buy price, probably reducing the quantity of taxable capital positive aspects after they promote eligible belongings throughout FY27.
Who can nonetheless declare indexation?
The notification doesn’t imply that every one taxpayers promoting capital belongings can robotically declare indexation.
Following the adjustments introduced within the Union Price range 2024, indexation has been withdrawn for many newly acquired capital belongings. Nonetheless, sure classes of taxpayers proceed to have entry to the profit.
One necessary class consists of resident people and Hindu Undivided Households (HUFs) promoting land or buildings acquired earlier than July 23, 2024. The place eligible, they will select the sooner capital positive aspects tax regime with indexation if it leads to a decrease tax legal responsibility than the brand new regime.
For such taxpayers, the newly notified CII of 384 can be used to find out the listed price of acquisition whereas computing long-term capital positive aspects.
Why does the notification matter?
Though the CII notification is issued yearly, it offers certainty for taxpayers, chartered accountants, tax professionals and companies concerned in capital positive aspects calculations.
The notified index turns into the official reference level for computing listed acquisition prices wherever indexation is permitted below the Earnings-tax Act.
Taxpayers planning to promote eligible immovable property throughout FY2026-27 ought to issue the brand new CII into their tax calculations whereas evaluating the tax payable below the previous indexation regime and the newer capital positive aspects framework.
Finally, the notification reinforces that whereas indexation has develop into extra restricted after the 2024 tax reforms, it continues to supply significant tax financial savings for eligible taxpayers disposing of sure long-held belongings.
