India's direct tax body has notified the Cost Inflation Index (CII), a tool to measure the rise in cost due to inflation, for fiscal year ending March 31, 2027, at 384.
The Central Board of Direct Taxes notifies CII every year and it was 376 in fiscal year 2026.
This will apply to the tax year 2026-27 on and from April 1, 2026, and subsequent tax years, accordng to a gazette notification.
What is the Cost Inflation Index?
Prices of goods and services usually rise over time because of inflation. As a result, the same amount of money buys fewer goods and services than before.
The Cost Inflation Index (CII) is a measure defined under Section 48 of the Income Tax Act, 1961, to account for this rise in prices. It assigns an index value to each financial year, reflecting the impact of inflation.
The base year for the index is 2001-02, which has been assigned a value of 100. The index values for all later years are calculated using this as the reference point.
CBDT notifies the CII every year through an official gazette notification.
The Cost Inflation Index provides an indexation benefit when certain long-term capital assets are sold. It adjusts the original purchase price of the asset to reflect the impact of inflation over the years.
A higher adjusted purchase price reduces the taxable capital gain, which can lower the amount of tax payable.
However, indexation benefit is available only for eligible long-term capital gains, and only where permitted under the applicable tax rules.
So, this index is used to claim the indexation benefit while calculating long-term capital gains tax. It adjusts the purchase price of an asset to reflect inflation over the period it was held. As a result, the taxable capital gain is reduced, which can lower the tax payable.
