Cost Inflation Index AY 2025–26: What Property Sellers Need to Know
The Cost Inflation Index AY 2025–26 has been notified by the CBDT at 363, offering timely tax relief to individuals selling real estate and other long-term capital assets. This indexation helps adjust the purchase price of assets for inflation, thereby reducing the taxable capital gain.
Let’s break down what this change means and how it affects your next property sale.
What is the Cost Inflation Index (CII)?
The Cost Inflation Index (CII) is notified every year under Section 48 of the Income-tax Act, 1961. It’s used to calculate the inflation-adjusted cost of acquisition/improvement for long-term capital assets.
Key points:
- Applies to long-term assets (held for more than 2 years in case of immovable property)
- Higher CII = lower taxable capital gain
- Helps account for inflation while computing tax liability
Latest Update: CII for FY 2024–25 / AY 2025–26
As per CBDT Notification No. 47/2025 dated 28.06.2025, the Cost Inflation Index for FY 2024–25 (AY 2025–26) is:
| Financial Year | Assessment Year | Cost Inflation Index |
|---|---|---|
| 2024–25 | 2025–26 | 363 |
This is a hike from the previous year’s value of 348 for FY 2023–24 (AY 2024–25).
Official Source: CBDT Notification No. 47/2025
How Does This Benefit Property Sellers?
If you sold a property in FY 2024–25, you can now index your purchase cost with CII 363 instead of 348. This reduces the net capital gains and hence, the tax payable.
Example Calculation:
- Purchase Year: FY 2008–09 (CII = 137)
- Purchase Price: ₹30,00,000
- Sale Year: FY 2024–25 (CII = 363)
- Sale Price: ₹1,00,00,000
Indexed Cost = ₹30,00,000 × (363 ÷ 137) = ₹79,45,255
Capital Gains = ₹1,00,00,000 – ₹79,45,255 = ₹20,54,745
Without indexation, the gain would have been ₹70 lakh. That’s a tax saving of nearly ₹10 lakh, assuming 20% LTCG tax rate.
Legal Reference and Basis
- Section 48 Explanation (iii): Empowers CBDT to notify the Cost Inflation Index.
- CBDT Notification No. 47/2025-Income Tax Dated 28 June 2025: CII for FY 2024–25 fixed at 363.
- Case Reference: CIT v. Shakuntala Kantilal – Indexation benefit is a statutory right for fair capital gain calculation.
Expert View: Use CII Smartly
Tip from Efiletax:
When selling an old property, always take help from a tax expert to apply indexation correctly. Improper calculations or using wrong CII years can lead to tax notices or excess tax payment. Also, ensure to retain evidence of cost (registry, receipts, loan statements).
Step-by-Step: How to Use CII in Your ITR
- Identify the original year of purchase/improvement
- Note the CII for that year and CII for the sale year
- Use this formula:
Indexed Cost = Original Cost × (CII of Sale Year ÷ CII of Purchase Year) - Subtract indexed cost from sale value to get long-term capital gain
- Report under Schedule CG in ITR-2 or ITR-3
When CII is Not Applicable
- On sale of short-term assets (property held < 24 months)
- For non-residents selling unlisted shares or debentures (Section 112(1)(c))
- In case of bond/unit redemptions without indexation option
FAQ on Cost Inflation Index AY 2025–26
Q1: Can I use the new CII for a property sold in April 2024?
Yes. The new index of 363 applies to all property sales between 1 April 2024 and 31 March 2025.
Q2: Is CII applicable to inherited property?
Yes, but the original owner’s purchase year and cost must be considered for indexation.
Q3: Can I avoid capital gains tax completely?
Yes, by reinvesting in another residential house under Section 54, or in capital gains bonds under Section 54EC within specified time limits.
Summary
The Cost Inflation Index for AY 2025–26 is fixed at 363, up from 348. This helps reduce capital gains tax for property sellers by inflating the purchase cost. Sellers of real estate in FY 2024–25 can use this benefit to lower their tax burden.
Need Help Calculating Capital Gains?
Use Efiletax’s expert team to file your return with maximum indexation benefit and minimum tax risk. Contact us now to get started.