CBDT Notifies Cost Inflation Index at 376 for FY26 for Capital Gains Calculation

The Central Board of Direct Taxes (CBDT) has notified the Cost Inflation Index (CII) for the financial year 2025-26 at 376, up from 363 in FY25. The updated index will be used for calculating long-term capital gains during the assessment year 2026-27 and beyond. The notification comes into effect from April 1, 2026.

Adjusting Capital Gains

The CII is a reference number used to adjust the purchase price of capital assets for inflation. This adjustment lowers the taxable capital gain when the asset is sold. It applies to long-term assets such as property, gold, securities, and patents acquired over time.

Applies to Sales Before Cut-Off

Indexation using the CII will still be available for taxpayers selling land and buildings acquired before July 23, 2024. In such cases, individuals and Hindu Undivided Families (HUFs) can choose to pay 20% tax with indexation or 12.5% tax without indexation. This option does not extend to non-residents, companies, or LLPs.

Finance Act 2024 Restricts Indexation Scope

The Finance Act 2024 removed indexation benefits for most assets sold after July 23, 2024. As a result, the CII no longer applies to capital gains from those transactions. Only specific categories of land and building sales retain the indexation option.

Delayed Notification This Year

The CII is usually announced in May or June, but the FY26 index was announced later than usual. This follows delays in the release of income tax return forms for FY25 and may affect early tax planning and estimation.

Conclusion

The new CII of 376 will be relevant for a limited set of transactions in FY26. It allows eligible taxpayers selling older land and building assets to account for inflation in their tax calculations.

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