CBDT Hikes Cost Inflation Index To 376 For FY26, Eases Capital Gains Tax For Some; Details Inside

This revised index will be applicable for tax assessments in the assessment year 2026–27, covering income earned during FY26

The CII is a critical component in computing inflation-adjusted gains on capital assets such as real estate, equity, and gold

Source : Freepik

The Central Board of Direct Taxes (CBDT) has updated the Cost Inflation Index (CII) to 376 for the financial year 2025-26 (FY26), providing partial tax relief to individuals calculating long-term capital gains. This is a rise from last year’s index of 363 and is aimed at helping taxpayers adjust the purchase price of long-term assets to reflect inflation.

The CII is a critical component in computing inflation-adjusted gains on capital assets such as real estate, equity, and gold. It allows individuals to inflate the original cost of acquisition, effectively reducing the taxable portion of profits when such assets are sold.

This revised index will be applicable for tax assessments in the assessment year 2026–27, covering income earned during FY26. The intent behind indexation is to ensure that tax is levied on actual gains rather than increases in value purely due to inflation over time.

However, recent tax reforms have limited the scope of indexation. The Finance Act of 2024 introduced a new framework under which indexation benefits are mostly restricted to assets sold before July 23, 2024. For transactions occurring after that date, only a select group, resident individuals and Hindu Undivided Families (HUFs), can opt for indexation, and only if the asset was acquired before the July 23 cut-off.

New Vs Old Tax Regime

Those eligible for the grandfathering provision can choose between two tax routes: a 20 per cent tax with indexation or a 12.5 per cent flat tax without it. This choice, however, does not extend to non-resident Indians (NRIs), corporates, or limited liability partnerships (LLPs), who must adopt the simplified flat-rate system introduced under the new regime.

Implications For Long-Term Asset Sales

The revision in the CII comes at a time when many taxpayers are re-evaluating their investment strategies amid regulatory changes. Individuals planning to sell long-held assets such as property, shares, or land may find some comfort in the higher indexation figure, provided they qualify under the older tax rules.