Q1: What is the Cost Inflation Index (CII)?
A1: The Cost Inflation Index is a tool used to measure the inflation in the economy and is released annually by the Central Board of Direct Taxes (CBDT) in India.
Q2: What is the purpose of CII?
A2: CII is used to calculate the inflation-adjusted cost of an asset when computing long-term capital gains for tax purposes. It helps in reducing the tax burden on capital gains by adjusting for inflation.
Q3: How often is the CII updated?
A3: The CBDT updates and releases the CII annually, typically at the beginning of each financial year.
Q4: What is the base year for CII?
A4: Currently, the base year for CII is 2001-02, with a base value of 100.
Q5: How is CII used in capital gains calculations?
A5: To calculate inflation-adjusted cost, multiply the original cost of the asset by the ratio of CII for the year of sale to CII for the year of purchase.
Q6: Does CII apply to all types of assets?
A6: CII is primarily used for long-term capital assets. It's not applicable for short-term capital gains or for certain assets like bonds and debentures.
Q7: Can CII be used for assets acquired before 2001?
A7: Yes, for assets acquired before 2001, you can use the fair market value as of April 1, 2001, as the cost of acquisition.
Q8: How does CII benefit taxpayers?
A8: CII helps reduce the tax liability on long-term capital gains by accounting for the eroding effect of inflation on the value of money over time.
Q9: Where can one find the latest CII figures?
A9: The CBDT releases the updated CII through notifications, which are available on the Income Tax Department's official website.
Q10: Is using CII mandatory for capital gains calculations?
A10: Yes, using the applicable CII is mandatory for calculating taxable long-term capital gains on eligible assets.
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