Long-term liability of capital gains on the sale or transfer of a capital active, such as country, real estate, trademarks and patents are expected to be lower this year, since Cost Inflation Index (CII) for the 2025-26 financial year has been set at 376 for 363 for the 2024-25 financial year. This shows an increase of 3.58 percent.
The Central Council of Direct Taxes (CBDT) has informed the index. It will be useful for land or building purchased before July 23, 2024
“This notification takes effect on the 1st day of April 2026 and applies accordingly to the assessment year 2026-27 and the following years,” said it. The CII number helps to determine the long-term profit on which an Assessee is obliged to pay tax when it/he will submit income tax returns (ITR) next year.
CII is a way to calculate inflation, that is, an estimated increase in the price of a good or service over the years. Indexation is used to adjust the purchase price of an investment to reflect the effect of inflation on it. A higher purchase price means less profit, which effectively means a lower load.
With the help of indexing, one will be able to lower its/its long -term capital profits, which yields taxable income. The inflation that must be used for indexing can be obtained from the government’s CII.
The central government reports the index. Usually for the calculation of CII, long -term capital are taken into account. To improve the taxpayers, the CII is applied to the long -term capital assets, which increases the purchase costs, resulting in lesser profit and lesser taxes.
The indexation was in the news last year when Finance Act 2023 removed this for degrading funds. From 1 April and furthermore, the profit for funds will be taxed against the taxplace of the investor, instead of the previous 20 percent with indexation benefit and 10 percent without the result, if the investor is subject to the highest tax bracket, this rate would be 35.8 percent (including surcharge and CESS).
From July 23, 2024, the government has stopped the indexation advantage of long -term profits in the long term. This means that investors can no longer adjust the purchase price of their investments for inflation when calculating capital gains for tax purposes. As a result, long -term profit will be calculated on the basis of the actual purchase price, which may result in higher taxable profits and therefore a higher tax obligation for investors.
In the case of transfer of land or building obtained before 23 July 2024, however, taxpayers have the option of paying taxes at a rate of 12.5 percent without indexation benefits or 20 percent with indexation benefits.
However, on the ground or building purchased on or after July 23, 2024, the tax rate is 12.5 percent without an indexation benefit, applies to assets that are qualified as in the long term.
Published on July 2, 2025
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