Cost Inflation Index (CII)

Tax Glossary Definition

Cost Inflation Index (CII)

The Cost Inflation Index (CII) is a measure used under the Income Tax Act to adjust the purchase price of a capital asset for inflation. It helps in calculating the indexed cost of acquisition or improvement, ensuring that only the real (inflation-adjusted) capital gain is taxed. The Central Government notifies the CII for each financial year.

Example: If an asset was purchased in FY 2004–05 (CII = 113) and sold in FY 2024–25 (CII = 363), then the indexed cost of acquisition is calculated as (Original Cost × 363 ÷ 113).

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