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What is Cost Inflation Index (CII)?
CII is a measure of inflation that finds application in tax law, when computing long-term capital gains on sale of assets. Section 48 of the Income-Tax Act defines the index as what is notified by the Central Government every year. Capital gain arises when the net sale consideration of a capital asset is more than the cost. Since “cost of acquisition” is historical, the concept of indexed cost allows the taxpayer to factor in the impact of inflation on cost. Consequently, a lower amount of capital gains gets to be taxed than if historical cost had been considered in the computations. For example, if a property purchased in 1991-92 for Rs 20 lakh were to be sold in F.Y. 2008 -09 for Rs 80 lakh, indexed cost = (582/199) x 20 = Rs 58.49 lakh. And the long-term capital gains would be Rs 21.51, that is Rs 80 lakh minus Rs 58.49 lakh.
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| Financial Year | (CII) | Financial Year | (CII) |
| 1981-82 | 100 | 1996-97 | 305 |
| 1982-83 | 109 | 1997-98 | 331 |
| 1983-84 | 116 | 1998-99 | 351 |
| 1984-85 | 125 | 1999-00 | 389 |
| 1985-86 | 133 | 2000-01 | 406 |
| 1986-87 | 140 | 2001-02 | 426 |
| 1987-88 | 150 | 2002-03 | 447 |
| 1988-89 | 161 | 2003-04 | 463 |
| 1989-90 | 172 | 2004-05 | 480 |
| 1990-91 | 182 | 2005-06 | 497 |
| 1991-92 | 199 | 2006-07 | 519 |
| 1992-93 | 223 | 2007-08 | 551 |
| 1993-94 | 244 | 2008-09 | 582 |
| 1994-95 | 259 | 2009-10 | 632 |
| 1995-96 | 281 | 2010-11 | 711 |
| 2011-12 : 785 | |||
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