2014-15: Cost inflation index raised by 9.05%

In the 2013-14 year the cost inflation index increased 10.2%

The Central Board of Direct Taxes (CBDT) has specified a value for the cost inflation index for 2014-15.

A cost inflation index helps reduce the inflationary gains, thereby reducing the long-term capital gains tax payout for a taxpayer.

Last year (2013-14), the index was ‘939’, and this year (2014-15) it is ‘1024’.

This would mean that there has been a 9.05% rise in the cost inflation index for 2014-15.

The index is useful for income-tax assessees in the computation of tax on long-term capital gains (LTCG) for indexation purposes).

In the previous year (2013-14), the cost inflation index increased 10.2%t.

Currently, the income-tax law allows LTCG to be computed after adjusting for inflation.

The cost of acquisition as well as the cost of improvement is adjusted for inflation between the date of purchase and date of sale (through the cost inflation index) before the long-term capital gain is ascertained.

The income-tax law requires the CBDT to specify the cost inflation index for a financial year after factoring in 75% of average rise in consumer price index for urban non-manual employees for the immediately preceding financial year. Last year, the CBDT hadgf specified the cost inflation index in early June. This year too it has been done in June. 

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