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Here is the full latest update of the Cost Of Inflation Index (CII) For AY 2020-2021. Give your 2 minutes to read this post to stay updated.
Cost Of Inflation Index (CII) For AY 2020-2021
CBDT Announced Cost of Inflation Index (CII) for 2020-21: CBDT vide Notification No. 32/2020 outdated 12.06.2020 advised the Cost of Inflation Index (CII) FY 2020-21 (AY 2021-22) for the purpose of computation of Capital Gains.
CBDT annually informs the CII information for every year. In this procedure, the Cost of Inflation Index or CII for the Financial Year 2021-22 is advised as 301. Exactly the same was 289 at the previous year 2019-20, an increase of 4.15 percent over the previous year.
The significance of CII or Price Index is that this amount is used to reach the inflation-adjusted cost price of resources transferred with the aim of calculating long-term capital gains.
But for calculating capital gains in respect of the benefit acquired prior to 1st April 2001, the individual was granted an option of to take the reasonable market value of their advantage according to 1st April, 2001 or the true price of the asset as price of acquisition.
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Before, the Finance Act, 2017 had altered the base year for calculating indexation from FY 1981-82 into FY 2001-02. This was done since the foundation year for computation of capital gains has been over three years old and assessees were facing real difficulties in calculating the capital gains in respect of a capital advantage, particularly immovable property obtained before 01.04.1981 because of non-availability of pertinent information for computation of the fair market value of such asset according to 01.04.1981.
To be able to revise the foundation year for computation of capital gains, Section 55 of this Act was amended by Finance Act, 2017 in order to provide that the price of acquisition of an asset acquired before 01.04.2001 will be permitted to be considered fair market value as on 1st April, 2001 and the price of improvement shall comprise only those capital expenditures that are incurred following 01.04.2001.
Consequential modification was also made in part 48 in order to align the terms about the Cost of inflation index to the projected base year.
This new base year of FY 2001-02 is applicable from 1st April, 2018 or evaluation year 2018-19 and following decades.
Section 55 is further amended by Finance Act, 2020 (in the evaluation year 2021-22 and onwards) to limit the reasonable market value of an advantage, being property or building or both, on 1st April, 2001 to the stamp duty value of such strength as on 1st April, 2001 where these stamp duty worth is accessible.
Therefore, the price of the resources purchased before or on FY 2001-02 is improved by over 3 times in twenty decades of time.
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Announcement Of COST Of INFLATION INDEX UNDER SECTION 48, EXPLANATION (V)
According to Notification . S.O. 1879(E) [No. 32/2020 (F.No. 370142/17/2020-TPL)], Dated 12-6-2020 (https://incometaxindia.gov.in/communications/notification/notification_32_2020.pdf), after table Ought to Be used for the Cost of Inflation Index-
|
Sl. No. |
Financial Year |
Cost of Inflation Index |
|
1 |
2001-02 |
100 |
|
2 |
2002-03 |
105 |
|
3 |
2003-04 |
109 |
|
4 |
2004-05 |
113 |
|
5 |
2005-06 |
117 |
|
6 |
2006-07 |
122 |
|
7 |
2007-08 |
129 |
|
8 |
2008-09 |
137 |
|
9 |
2009-10 |
148 |
|
10 |
2010-11 |
167 |
|
11 |
2011-12 |
184 |
|
12 |
2012-13 |
200 |
|
13 |
2013-14 |
220 |
|
14 |
2014-15 |
240 |
|
15 |
2015-16 |
254 |
|
16 |
2016-17 |
264 |
|
17 |
2017-18 |
272 |
|
18 |
2018-19 |
280 |
|
19 |
2019-20 |
289 |
|
20 |
2021-21 |
301 |
Price Interest Indicator or CII is utilized to compute inflation-adjusted cost just for those resources where indexation gain is permitted.
CII worth cannot be used to calculate long-term capital gains on equity mutual funds since they’re taxed at a flat rate of 10% without indexation benefit.
However, for different resources, CII worth may be used.
How Cost Inflation Index Value is used
This the method of how you can calculate the Cost Inflation Index Value.
The formula is given below:
ICP=(CIIt/CIIp) x CP
Where,
ICP stands for Indexed Cost Price of the asset transferred
CIIt stands for CII worth of this fiscal year where strength is transferred
CIIp stands for CII worth of this fiscal year where asset was acquired
CP stands for the Price Price of the asset transferred
Illustration:
Mr. Amar (Name of person) bought a home property on 12.11.2007 for Rs 25 lakh that’s offered on 10.06.2020 for Rs 60 lakh. Compute the Long-term capital gain.
Computation of Long Term Capital Gain:
|
Full Value of consideration (Sale Price) |
60,00,000 |
|
Less: Indexed Cost of acquisition 301/129 x 25 Lakh |
58,33,333 |
|
Long Term Capital Gain |
1,66,667 |
An individual has to keep in mind that indexation using CII worth is permitted just for long-term capital assets rather than for short-term funding capital assets.
If a individual has earnings for capital gains, he can’t utilize ITR-1 for reporting the earnings from capital gains within his income tax return. He could utilize ITR-2 (if no company income) or even ITR-3 (having company income).
The indexed cost of acquisition in the event of long duration assets is permitted for adjustment of inflation which assists in cutting the earnings from capital gains and consequently the long-term capital gains taxation.
FAQs (Frequently Asked Questions)
What is meant by CBDT?
Central Board of Direct Taxes
The Central Board of Direct Taxes is a statutory Jurisdiction Working under the Central Board of Revenue Act, 1963.
The officers of the Board within their ex-officio capability also be the Section of the Ministry dealing with matters pertaining to levy and collection of direct taxation. Historical Background of C.B.D.T.
Who is present CBDT Chairman?
Pramod Chandra Mody, a 1982-batch Indian Revenue Service (Income Tax cadre) officer, was appointed instead of Sushil Chandra. NEW DELHI: IRS officer Pramod Chandra Mody on Friday took over because the newest chairman of the Central Board of Direct Taxes (CBDT), the policy making body of the Income Tax Department.
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