1. For computation of Capital gains, Cost Inflation Index (CII) data, and not CPI data, is used.
2. CII data has been notified by CBDT every year from FY1981-82 onwards.
3. As per Sec 48 of IT Act, CII of every year is computed after considering 75% of the average rise in CPI for urban non-manual employees for the immediately preceding previous year.
4. As CII for base year FY1981-82 was started as 100, CII for next year FY1982-83 was 109 (after adding 75% of inflation of 12%), and subsequent CII were also similarly computed till it became 1125 in FY2016-17.
5. As taxpayers were facing hardship in getting properties valued which were purchased before 1-4-1981, and tax authorities were also finding it difficult to rely on their valuation reports, government decided to shift the base year to FY2001-02 for enabling quicker computations and accurate valuations.
6. Therefore, Sec 55 of IT Act was amended vide Finance Act, 2017, and notified by CBDT Not. 44/2017 dt. 5-6-2017, by which for any capital asset purchased before 1-4-2001, but sold after 1-4-2017, taxpayers can take higher of actual cost, or Fair Market Value (FMV) as on 1-4-2001, whichever would be more beneficial to them, as purchase price and avail benefit of indexation.
7. FMV is based on valuation report of a registered valuer.
8. CII for base year FY2001-02 is now 100, and the latest CII for FY2019-20 is 189.
9. Suppose your house was purchased in 1984, i.e. before new base year of FY2001-02, you can consider cost of acquisition as its actual cost, or its FMV on 1-4-2001, whichever is higher, or would be more beneficial, to calculate Capital gains for taxation accordingly.
10. Additional inputs:-
a) If the property has been received through a Will, CII is taken for the year in which it is received, and not for its actual year of purchase which has to be ignored.
b) Any property improvement cost incurred before 1-4-2001 is also ignored in calculations.
c) Index benefit is not allowed on bonds or debentures, except Capital Indexation Bonds or Sovereign Gold Bonds issued by RBI.
d) Formula for computation of indexed cost of acquisition is:-
Purchase Price of asset Sold x (CII for the year of sale ÷ CII for the year the asset was acquired or bought).
2. CII data has been notified by CBDT every year from FY1981-82 onwards.
3. As per Sec 48 of IT Act, CII of every year is computed after considering 75% of the average rise in CPI for urban non-manual employees for the immediately preceding previous year.
4. As CII for base year FY1981-82 was started as 100, CII for next year FY1982-83 was 109 (after adding 75% of inflation of 12%), and subsequent CII were also similarly computed till it became 1125 in FY2016-17.
5. As taxpayers were facing hardship in getting properties valued which were purchased before 1-4-1981, and tax authorities were also finding it difficult to rely on their valuation reports, government decided to shift the base year to FY2001-02 for enabling quicker computations and accurate valuations.
6. Therefore, Sec 55 of IT Act was amended vide Finance Act, 2017, and notified by CBDT Not. 44/2017 dt. 5-6-2017, by which for any capital asset purchased before 1-4-2001, but sold after 1-4-2017, taxpayers can take higher of actual cost, or Fair Market Value (FMV) as on 1-4-2001, whichever would be more beneficial to them, as purchase price and avail benefit of indexation.
7. FMV is based on valuation report of a registered valuer.
8. CII for base year FY2001-02 is now 100, and the latest CII for FY2019-20 is 189.
9. Suppose your house was purchased in 1984, i.e. before new base year of FY2001-02, you can consider cost of acquisition as its actual cost, or its FMV on 1-4-2001, whichever is higher, or would be more beneficial, to calculate Capital gains for taxation accordingly.
10. Additional inputs:-
a) If the property has been received through a Will, CII is taken for the year in which it is received, and not for its actual year of purchase which has to be ignored.
b) Any property improvement cost incurred before 1-4-2001 is also ignored in calculations.
c) Index benefit is not allowed on bonds or debentures, except Capital Indexation Bonds or Sovereign Gold Bonds issued by RBI.
d) Formula for computation of indexed cost of acquisition is:-
Purchase Price of asset Sold x (CII for the year of sale ÷ CII for the year the asset was acquired or bought).