CBDT Announces Cost Inflation Index for FY 2026-27

The Central Board of Direct Taxes (CBDT) has notified the Cost Inflation Index (CII) at 384 for the financial year 2026-27, as per the news reports.  

The notification, issued through the Ministry of Finance's gazette on July 15, will take effect from April 1, 2026, and apply to Tax Year 2026-27 and subsequent years. The index has been increased from 376 notified for FY2025-26. 

The Cost Inflation Index is revised every financial year and is used in the calculation of long-term capital gains wherever indexation benefits are available under the Income-tax law. 

Purpose of the Index 

The CII is a measure used to account for inflation while calculating the cost of acquiring a capital asset. It is provided under Section 48 of the Income Tax Act, 1961, with the current base year fixed at 2001-02, carrying an index value of 100. 

By adjusting the purchase price for inflation, the index helps determine the inflation-adjusted cost of acquisition. This ensures that tax is calculated on the real gain arising from the sale of an eligible asset rather than the entire increase in its value over time. 

Impact on Capital Gains Calculation 

The increase in the index from 376 to 384 means the indexed purchase cost of eligible assets will be higher for FY2026-27. A higher indexed cost generally reduces the amount of taxable long-term capital gains where indexation is permitted. 

Capital gains arise from the sale or transfer of assets such as land, buildings, shares, securities, trademarks, and patents. The notified index is used while computing tax liability for eligible long-term capital assets. 

Limited Applicability After Tax Changes 

The revised CII will apply only to cases where indexation continues to be available. Following changes announced in the 2024 Union Budget, indexation was withdrawn for most newly acquired capital assets. 

However, resident individuals and Hindu Undivided Families (HUFs) selling land or buildings acquired before July 23, 2024, may continue to opt for the earlier tax regime with indexation where permitted under the law and where it results in a lower tax liability. 

Read More: India's Wholesale Inflation Surges Over 2-Year High at 9.87% in June 2026, as Food and Fuel Prices Surge! 

Conclusion 

The annual notification sets the Cost Inflation Index for FY2026-27 at 384, providing the inflation adjustment applicable to eligible long-term capital gains calculations under the prevailing tax provisions. 

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