What is Cost Inflation Index?

Every year the cost of inflation index is used to calculate the amount of tax which is to be levied on an asset which is sold. The assets which are sold within the time frame of less than 1 year to less than 3 years come under short term capital gain. The assets which are sold within the time frame of more than 3 years come under the long term capital gain.

On short term capital gain, there is no indexation allowed and the proceeds i.e. the profits are to be shown as your regular income. However, on long term capital gain, the income tax department allows you to add indexation, the meaning of the same is since there is inflation which results in the reduction of the value of rupee, the cost to acquire the asset has risen every year it was in your possession. So if the cost to acquire an asset in 2000 was Rs. 1,00,000 than in 2018 because of inflation the cost to acquire the same asset will become more.

How the cost to acquire the asset today is calculated is called cost inflation index.
 
 

Cost Inflation Index Table

Year
Index
Year
Index
1981-1982
100
1999-2000
389
1982-1983
109
2000-2001
406
1983-1984
116
2001-2002
426
1984-1985
125
2002-2003
447
1985-1986
133
2003-2004
463
1986-1987
140
2004-2005
480
1987-1988
150
2005-2006
497
1988-1989
161
2006-2007
519
1989-1990
172
2007-2008
551
1990-1991
182
2008-2009
582
1991-1992
199
2009-2010
632
1992-1993
223
2010-2011
711
1993-1994
244
2011-2012
758
1994-1995
259
2012-2013
852
1995-1996
281
2013-2014
939
1996-1997
305
2014-2015
1024
1997-1998
331
2015-2016
1081
1998-1999
351
2016-2017
1125