The Central Board of Direct Taxes (CBDT) has raised the Cost Inflation Index (CII) for the financial year 2026-27 by 2.3% to 384 from the previous year’s 376. This adjustment, effective from April 1, 2026, aids in calculating long-term capital gains tax by accounting for inflation in asset purchase prices.
The CII modification benefits taxpayers selling assets like property and land by reducing taxable profit. It adjusts the original purchase price to reflect inflation over time, providing a more accurate valuation of the capital gain on the sale. However, post changes in the Finance Act, 2024, indexation benefits using CII have been discontinued for most long-term capital assets transferred after July 23, 2024.
Following the Finance Act amendments, a flat tax rate of 12.5% applies without indexation for most cases. The CII’s relevance now primarily lies in a limited grandfathered scenario, where resident individuals and Hindu Undivided Families (HUFs) selling pre-July 23, 2024, acquired land or buildings can choose between the new 12.5% tax rate without indexation or the old 20% rate with indexation for lower tax liability.
India’s net direct tax collections for the current financial year saw a robust 16.4% year-on-year growth to Rs 6.51 lakh crore as of July 13. This growth was driven by increased corporate tax, non-corporate tax, and securities transaction tax (STT) collections, according to CBDT data. Net corporate tax collection surged by over 22% to approximately Rs 2.40 lakh crore, while net non-corporate tax collection rose by about 12% to Rs 3.85 lakh crore. Securities Transaction Tax (STT) also witnessed a significant increase of over 44% to exceed Rs 26,000 crore.
