The cost inflation index (CII) for the financial year (FY) 2021-22 has been notified by the Ministry of Finance. In a notification dated June 12, the finance ministry stated that CII for FY 2021-21 has been set as 317. For the previous financial year, CII was 317.
This notification shall come into force with effect from the 1st day of April 2022, and shall accordingly apply to the Assessment Year 2022-2023 and subsequent years.
CII number is important as it is used to arrive at the inflation-adjusted purchasing price of assets and thereby long-term capital gains (LTCG). It is also important to compute the long-term capital gains/long-term capital losses (LTCL) on the assets which have been or are planned to be sold in FY 2021-22. There are two things that people must keep in mind relating to the cost inflation index.
Firstly, his number would be utilized to compute inflation-adjusted cost only for those assets where inflation-adjusted (indexation benefit) is permitted. Thus, the CII value could not be used to reach LTCG/LTCL on equity mutual funds.
Secondly, this CII number would be necessary to compute LTCG for Financial Year 2021-22. The taxes on these gains would be paid by you while filing your income tax returns (ITR) for Financial Year 2021-22 (AY 2022-23), that is, next year.
The table below shows the CII of the last 5 years: