The Cost Inflation Index in India: How to reduce long term capital gains tax!
Introduction : The Cost Inflation Index (CII) is a significant concept in the Indian taxation system that is used to assess the annual growth in the cost of goods and assets owing to inflation. This article is surely going to shed some light on the CII and how it affects capital gains tax computation. Cost Inflation Index (CII) : The Indian Income Tax Department uses the Cost Inflation Index (CII) as a measure to adjust the purchase cost of a capital asset for inflation. The long-term capital gains tax (LTCG tax) is effectively calculated with the help of the CII, considering the impact of inflation on the asset’s purchase price. Importance of CII : The main objective of the CII is to incorporate inflation into the computation of long-term capital gains tax. Taxpayers can reduce their overall tax obligation by lowering the amount of capital gains that are taxed by modifying the acquisition price of a capital asset. For example, if you have purchased a property in 1991-92 for Rs 2...