CBDT, in exercise of its powers conferred by clause (v) of the Explanation to section 48 of the Income Tax Act, 1961 (‘the Act’), vide Notification No. 70/2025 dated 1st July, 2025 notifies the cost inflation index for FY 2025-26. As per the notification, the cost inflation index (‘CII”) of ‘376’ has been prescribed for FY 2025-26. The notification shall come into force on April 1, 2026 and shall apply to the AY 2026-27 and subsequent years. The CII prescribed by the CBDT is relevant for the purpose of computing income under the head Capital Gain chargeable to tax as per the provisions of the Act. Prior to Finance (No. 2) Act, 2024, the CII was required to determine the indexed cost of acquisition/ improvement of a long-term capital asset, as per the 2nd proviso to section 48 of the Act, for computing the Long-term capital gain arising from transfer of such long-term capital asset during the Assessment Year. However, post application of Finance (No. 2) Act, 2024, the CII shall be required only for determining indexed cost of acquisition/ improvement of immovable property acquired before July 23, 2024 and sold thereafter, subject to certain conditions.

The summary information herein is based on CBDT notification no. 70/2025 dated 1st July, 2025. While the information is believed to be accurate, we make no representations or warranties, express or implied, as to the accuracy or completeness of it. Readers should conduct and rely upon their own examination and analysis and are advised to seek their own professional advice. This note is not an offer, advice or solicitation. We accept no responsibility for any errors it may contain, whether caused by negligence or otherwise or for any loss, howsoever caused or sustained, by the person who relies upon it

The Central Board of Direct Taxes (CBDT) has officially notified the Cost Inflation Index (CII) for the Financial Year 2025–26 (Assessment Year 2026–27) as 376. This figure is crucial for taxpayers calculating long-term capital gains (LTCG), particularly when applying indexation benefits.

The CII is used to adjust the purchase price of capital assets for inflation, which helps reduce the tax burden on long-term capital gains. The higher the index in the year of sale, the greater the benefit of indexation, effectively reducing taxable gains.

Important Considerations For assets purchased on or before 22nd July 2024, the indexation benefit and the 20% LTCG tax rate continue to apply. For assets acquired on or after 23rd July 2024, indexation is not available, and gains may be taxed at a flat 12.5% (without indexation), depending on asset type and tax regime. The CII is particularly relevant for immovable property, listed/unlisted shares, and mutual funds held for the long term.