How Indexation Worked (Pre-July 2024)
Worked example: Property bought in FY 2010-11 for ₹40 lakh (CII = 167). Sold in FY 2024-25 for ₹1.2 crore (CII = 363). Indexed cost = 40 × (363÷167) = ₹86.9 lakh. Old regime: LTCG = ₹1.2cr − ₹86.9L = ₹33.1L taxed at 20% = ₹6.62 lakh tax. New regime (post July 2024): LTCG = ₹1.2cr − ₹40L = ₹80L taxed at 12.5% = ₹10 lakh tax. In this case, old regime was better. Always compute both.
Cost Inflation Index — Key Years
| Financial Year | CII | Financial Year | CII |
|---|---|---|---|
| 2001-02 (Base) | 100 | 2013-14 | 220 |
| 2004-05 | 113 | 2016-17 | 264 |
| 2007-08 | 129 | 2019-20 | 289 |
| 2010-11 | 167 | 2022-23 | 331 |
| 2011-12 | 184 | 2023-24 | 348 |
| 2012-13 | 200 | 2024-25 | 363 |
*CII values are notified by CBDT each year. Verify latest CII from the official income tax website before computing.
Budget 2024 Impact — What Changed
| Factor | Before July 23, 2024 | After July 23, 2024 |
|---|---|---|
| LTCG tax rate | 20% | 12.5% |
| Indexation | Available — reduces taxable gain | Not available for property |
| Better for | Long-held properties with high inflation adjustment | Short-held LT properties with modest inflation |
| Grandfathering | For property sold before July 23, 2024 — old regime applies | New regime applies for all sales after July 23, 2024 |
Related Terms
Frequently Asked Questions
Indexation adjusts the original purchase cost of a property using the Cost Inflation Index (CII) to account for inflation, reducing the taxable capital gain. Formula: Indexed Cost = Purchase Price × (CII of Sale Year ÷ CII of Purchase Year). Budget 2024 removed indexation for residential property LTCG effective July 23, 2024 — replaced by 12.5% flat rate without indexation.
CII is an index published annually by CBDT (Central Board of Direct Taxes) to measure inflation for capital gains tax purposes. Base year is 2001-02 = 100. It is used to inflate the purchase cost of assets to their present value. For property sold after July 23, 2024, CII is no longer used for residential LTCG computation.
Yes. Budget 2024 (Union Budget presented July 23, 2024) removed indexation benefit for Long-Term Capital Gains on residential property. The LTCG rate was simultaneously reduced from 20% to 12.5%. For properties purchased before July 2024 and sold after, taxpayers may benefit from one or the other — consult a CA to determine which is more favourable.
Indexation removal in Budget 2024 was specifically for residential property LTCG. For other long-term capital assets like debt mutual funds (with indexation), gold, and unlisted shares, the applicable rules differ. Check the latest Finance Act provisions or consult a CA for asset-specific capital gains computation.
Without indexation (post July 23, 2024 for property): Capital Gain = Sale Price − Original Purchase Price − Selling Expenses. Apply 12.5% LTCG tax on the result. Stamp duty and registration paid at time of purchase can be added to the cost of acquisition. Improvement costs with documentation can also be added.