SEO Sai Gr. Hosp.
197052 Points
Joined July 2016
Indexed Cost of Acquisition/Improvement
Indexed cost of acquisition is calculated as:
Cost of acquisition / Cost inflation index (CII) for the year in which the asset was first held by the seller, or 1981-82, whichever is later X cost inflation index for the year in which the asset is transferred.
Indexed cost of improvement is calculated as:
Indexed cost of acquisition = Cost of acquisition * Cost inflation Index (CII) of the year in which the asset is transferred
Cost inflation index (CII) of the year in which asset was first held by the seller or 1981-82 whichever is later
Indexed cost of improvement = Cost of improvement *Cost inflation index of the year in which the asset is transferred
Cost inflation index of the year in which improvement took place
(Note: From FY 2017-18, the base year of 2001-02 will be considered instead of 1981-82)
Why is cost of acquisition and improvement indexed? Indexation, done by applying CII (cost inflation index), is made to adjust for inflation over the years. This increases one’s cost base and lowers the capital gains.