The Central Board of Direct Taxes (CBDT) has notified the provisional cost inflation index (CII) at 348 for the fiscal 2023-24, as against 331 for the last year. The cost inflation index is used to make adjustments in purchase price of long-term capital assets for the purpose of computing tax on capital gains.
“This notification shall come into effect from April 1, 2024 and shall, accordingly apply in relation to assessment, year 2024-25 and subsequent assessment years,” said the CBDT.
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The CII is used to measure and index for inflation to estimate the tax liability in case of sale of long-term capital assets such as property, shares and gold and helps taxpayers offset the impact of inflation as the difference between the purchase and sale price could be substantial due to rising prices.
Sandeep Jhunjhunwala, Partner, Nangia Andersen, said the provisional CII has come much ahead in time when compared to the prior years when it was notified mostly in the month of June, much closer to the first advance tax installment due date, leaving taxpayers with very little time to firm up their advance tax estimations.
“The provisional CII could be a sufficient guidance for taxpayers to determine their capital gains tax liabilities for the first quarter subject to the final notification, shielding interest consequences on deferment of payment of advance tax, to an extent,” he said.
Amit Maheshwari, Tax Partner, AKM Global, a tax and consulting firm, 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 the last year. “Taxpayers will have a tentative idea by then to calculate the advance tax on the capital gains assuming the final index is notified somewhere after June 15,” he said, adding that overall, the CII will be beneficial to taxpayers as assets, which are held for long term and are recorded at purchase cost despite increasing inflation.