The cost inflation index for FY 2019-20 as 289, notified by the Finance Ministry

CBDT had notified about the Cost of Inflation Index Financial Year 2019-20 AY 2020-21 for Capital Gain on 12th September 2019.

The notification stated in exercise of the powers conferred through clause (v) of the Explanation to section 48 of the Income-tax Act, 1961 (43 of 1961), the Central Government thus makes the following further amendments in the notification of the Government of India, Ministry of Finance (Department of Revenue), Central Board of Direct Taxes, on 13th June 2018,namely: 
 

In the stated notification, in the Table, after serial number 18 and the entries involving thereto, the following serial number and entries, would be inserted, namely:—
 

This notification would come into effect from the 1st day of April 2020 as well as would be applicable towards the AY 2020-2021 and following years.

The cost inflation index (CII) for the financial year 2019-20 were notified by the Ministry of Finance. In a notification made on 12th September, the finance ministry specified that CII for financial year 2019-20 has been set as 289. For the preceding financial year, CII was 280.

This number is vital as it is used to reach the inflation-adjusted purchasing cost of assets and thus long-term capital gains (LTCG). It is vital to calculate the long-term capital gains/long-term capital losses (LTCL) on the assets which were or are planned to be sold in the financial year 2019-20. The tax payable on such indexed LTCG is 20% plus cess at 4%.

There are two things that people must keep in mind relating to the cost inflation index.

First of all, this 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 at LTCG/LTCL on equity mutual funds as they are taxed at a flat rate of 10% without indexation benefit. Though for LTCG/LTCL made on the sale of debt mutual fund units or sale of property, land, etc., and CII number could be used.

Furthermore, this CII number would be necessary to compute LTCG for Financial Year 2019-20. The taxes on these gains would be paid by you while filing your income tax returns (ITR) for Financial Year 2019-20 (AY 2020-21), that is, next year.

For calculating the inflation-adjusted LTCG/LTCL for assets sold amid 1st April 2019 and 31st March 2020, the CII number to be used is for Financial Year 2019-20 which is 289.

The formula to compute inflation-adjusted cost price is (CII of the year of sale/CII for the year of purchase) * Actual cost price.

The table showing the CII numbers starting from 2001-02- 

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