The income tax department has notified the cost inflation index (CII) for the current fiscal at 348 against 331 for 2022-23.
A fall in CII could result in long-term capital gain liability on the sale or transfer of any capital asset, such as land, property, trademarks and patents, to be lower.
Inflation indexing is allowed in the case of long-term capital assets such as property and shares. These assets are reported on the books of the tax payers at the historical cost or the cost of acquisition.
Due to effect of inflation, the gap between purchase price and sale price could get inflated. Inflation indexing offers relief to tax payers from the effect of price rise.
Usually, the income tax department notifies CII in June.
AMRG & Associates senior partner Rajat Mohan said CII would help taxpayers to compute long-term capital gains tax enabling them to remit advance tax on time.
“This year’s cost of inflation index is notified 3 months earlier by the tax department compared with the last fiscal year.
“Taxpayers can now precisely and accurately compute tax on long-term gains in the first quarter of FY 2023-24 and pay the necessary advance tax,” Mohan said.
The inflation index has been notified on a provisional basis as of now and it may be said that it is rising faster compared to last year, said Amit Maheshwari, tax partner at AKM Global, a tax and consulting firm.
“The reason for notifying the same provisionally may be due to the payment of advance tax instalment which is due on or before June 15 2023.”
“Taxpayers in the country will have a tentative idea by then to calculate the advance tax on the capital gains assuming the final index is notified somewhere after 15 June,” said Maheshwari.