Cost Inflation Index for Capital Gain – Base changed in Budget 2017

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In Budget 2017, the base for Cost Inflation Index is changed. lets see what the change is and how it wil impact the investors.

Currently, for cost inflation index, the base year is 1981. which means if you have any property acquired before 1981, you need to get the fair market value in 1981 and then apply indexation.

Now, with the proposed changed, the base year will become 2001. This means, if you have any property acquired before 2001, you need to get the fair market value in 2001 and then apply indexation.

In my other post, I gave details of indexation chart from 1981 till 2017 – Read this

What is the impact?

Property Owners:  Experts think that property owners would benefit from this revision in base year. This is because the inflation rate in property market between 1981 and 2001 is not captured in the current index.

For example , between 1981 and 2001, the index has jumped four times from 100 to 406 whereas property prices have surged 10 times in the same period. The shift in base year will help align the index with the actual rise in property rates, and help investors get the full benefit of indexatio.

Gold Investors:  Shift in base year will not have much impact on Gold Investors as the gold prices were mainly appreciated after 2007

In my other post, I gave details of indexation chart from 1981 till 2017 – Read this

39 Replies to “Cost Inflation Index for Capital Gain – Base changed in Budget 2017”

  1. Sir

    can u plz elobarte the impact of changes in base year from 1981 to 2001 with example

    suppose Purchase property on Jul 1978 for Rs. 20,00,000 /- & sold in Sep 2013 for Rs. 50,00,000/-

    & if purchase Purchased was on Sep 1992 & Sold in Sep 2013

    wat will be indedxed cost of acquisition in both cases.

    Thanxs in advance for ur advice

    1. Hi Vijay, the impact will depend on the increase in the property value.

      If the property value between 1981 and 2001 has increased more than the indexation rate increase, the investor will get benefit.
      During this period, the indexation rate has gone up by 4 times, and if actual property value has increased by more than 4 times, then you will benefit.

      1. what is your e mail address please. i want to seek advice on property sale .the details are —
        purchase price rs. 2.5lakhs.
        year of purchase–1996.
        sale proposed in 2017.
        sale price 27lakhs.(proposed )
        i know how to use base year of 1981 for calculation of C.G.
        but how to use base year of 2001?will u please give both calculations? in details pl.

    2. I had sold my house property in sept.2018 at Rs.30,00,000 and purchase the same propeety in the year 1994 so what will be the impect of new cii and what will be tax liabilities and how much i will have to pay the tax and what will be the impect.

      1. Hi Hitesh, I am assuming that you have sold n Sep 2017?

        1) You need to get the Fair Market value in 2001
        2) Calculate Indexed cost based on 2017 & 2001 indexation rate
        3) Calculate capital Gain = Sale Price – Indexed Cost.

    3. The property was sold in 2013, so how does changing of base year to 2001 in 2017 affect capital gains transaction?

      However, for property purchase in 1978 will need FV as of 1981. Then Indexed value can be calculated as FV x 8.52

      For property purchase in 1992, indexed value is purchase price x 852 / 199.

      Capital gains for both is sale price less indexed value.

  2. Sir how do u find out the fair market value of an apartment for 2001 which govt dept needs to be contacted or is this info obtainable in the web thanks much obliged

  3. Sir
    I being a layman i need a clarification. I purchased two properties detials below

    Flat in november 1994 for 3.10 lacs . proposing to sell in jan 2018 aprox for 40 lacs . what is LTCG and tax on it and what amount i need to reinvest in real estate on or before which date to avoid tax.

    similarly june 88 i purchase a plot for 7500 proposing to sell in jan 2019 aprox for 60 lacs . what is LTCG and tax on it and what amount i need to reinvest in real estate on or before which date to avoid tax.

    similarly how do i calculate LTCG for Gold purchased between 1995 to 2015 .

    I will be obliged if you can mail the worksheet for me change figures in need be and get exact amount

    1. Hi Gopal,

      1) You need to get the Fair Market value in 2001. This can be done by a registered valuer (or may be local Lawyer / CA)
      2) Calculate Indexed cost based on 2017 & 2001 indexation rate
      3) Calculate capital Gain = Sale Price – Indexed Cost.

  4. I purchased residential flat in 2008 at 18L. If I sell the same at today’s rate of 50 L, then how should I calculate Indexation & what will be my tax liability.

    1. Hi Gobind,

      1) You need to get the Fair Market value in 2001
      2) Calculate Indexed cost based on 2017 & 2001 indexation rate
      3) Calculate capital Gain = Sale Price – Indexed Cost.

  5. Empty Land Bought during FY 1995 – 96 for Rs X. Planning to Sell it during FY 2018 – 19 for Rs Y.
    Based on Revised Base Year & CII in Budget 2017-18, pls help me calculate the LTCGT. Thanks a Lot.
    sb 101217

    1. Hi, You need to get the fair market value of land in 2001 and then calculate the indexed cost based on index for 2001 and 2019.

  6. Sir
    After sell of flat for 60L, in 2016-17, It was purchase for 10L in yr 2000-01,
    My capital gain is 38L approx.
    But difference in SP and purchase is 50L.
    So whether I have to pay tax on 50-38=12L

    1. Hi Nilam,

      You will need to pay long term capital gains tax and you can claim indexation benefit.

      You need to take the cost of acquisition as cost paid by your grandfather and then index it.
      You can claim indexation fromt he year when your grandfather bought it.

      If the year is unknowm, you can take the fair value as on 1981 and index from there.

  7. ours is an ancestrial property (building), constructed some where in 1925 like that. As a successor, if i sell the property, does the indexisation applicable for the above. if so how?. I want to sell the property for Rs. 10.00 lakhs now.
    please advise.

    1. Yes, you need to get the fair market value of the property as in 2001 and then apply the indexation to calculate the indexed cost.

  8. Dear sir Hi.
    I want to know that I want to sell my house which is in joint names.
    Purchased in 1997 and to be sold in April 2018.
    Will I get the benefit of LTCG if I invest in a residential property (the total proceeds ) as I have other residential properties in my name and another one in joint names.
    Thanks n regards
    Hemendra Singh

    1. Hi Hemendra, You can not get the LTCG benefit if you can more than 1 existing property. (in this case – seems you have more than one property in your name even joint one)

  9. Hi,

    I acquired shares of unlisted companies in 1995. I also own shares in my own private limited company since 1975. These were acquired through inheritance or from purchase from other family members. How do i calculate the FMV of these unlisted and private limited company shares as on 2001

    1. Hi, you can get financials of those companies to get the fair value. or get services of a professional valuer. They will need to do a valuation based on financial statements.

  10. A land was purchased in May 1983 and is sold in April 2018. Can I use the CII till 2001 to know the FMV and then use CII for 2001 till 2018 to know the Capital Gain?

  11. I rigistered new property in 2000 for 8.5 lakhs and sold it in 2017 for Rs. 49.5 lakhs, can you let me know how i can calculate capital gains for the financial year 2018-2019

  12. I have plot bought in 1989 for Rs. 4300/-. Today I looking to sell it for Rs. 20,00,000/-

    What would be my capital gain in the and what is the calculation. How do I define the fair market price for this plot for 2001 as the base year would be considered as 2001 for Cost of inflation Index.
    Please help.

  13. I am going to sell my property for Rs.6.5 cr and the property was purchased in 2002 for Rs.1.25 cr. What could be the capital gain. Can I reinvest on two properties to get exemption of capital gains

    1. Looks like Index cost will be 3.33 crores (1.25 X 280 / 105)
      Capital Gain will be 3.17 crores (6.5 – 3.33 crores)

      You can get capital gains exemption when you invest in residential properties subject to conditions. Please see the conditions below
      https://wealth18.com/how-to-save-capital-gains-tax-on-sale-of-property-in-india/

      You can claim exemption on residential investment if at the time of investment, you donot have more than 1 residential property.

  14. Sir,
    I have bought a house at Sep 1999 for 24.6 Lakhs, sell a house at May 2015 for 1.15 crore.
    In this amount i buy a new house at Aug2015 for 70.5 Lakhs.
    How much i have to pay the tax for remaining amount.

    1. Hi Ashok, You should have already filed return for this income in FY 2015-2016 by 31 May 2016. In terms of capital gains, the formula is below:

      https://wealth18.com/cost-inflation-index-chart-table-1981-to-2014-for-income-tax-capital-gain-purpose/

      Capital Gain = Sale price – Indexed cost
      Indexed cost = cost * Index in Sale year / Index in Purchase year (or 2001)

      As you bought property before 2001, you need to get the Fair market value of the property in 2001 to calculate the indexed cost.

      Once you calculate the capital gain, then you can claim exemption based on your new property purchase.

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