📢 CBDT Notifies “376” as Cost Inflation Index (CII) for FY 2025‑26 | Aaerm Law Associates | July 2, 2025
🧾 Executive Summary
The Central Board of Direct Taxes (CBDT) has released Notification No. 70/2025 on July 1, 2025, setting the Cost Inflation Index (CII) for Fiscal Year 2025–26 at 376. The new index will apply from April 1, 2026, impacting the Assessment Year 2026–27 and onward. This annual adjustment empowers taxpayers to account for inflation in calculating long-term capital gains, ensuring more realistic and equitable tax outcomes.
🔍 What Is the Cost Inflation Index (CII)?
The CII is a government-defined index used under Section 48 of the Income‑tax Act, 1961, to adjust the purchase cost of an asset to its inflation-adjusted value when computing long-term capital gains (LTCG) upon disposal. Each year, the index reflects general inflation levels, preventing taxpayers from paying unnecessary tax on nominal profits caused solely by inflation.
📜 Official Notification Details
- Notification: No. 70/2025
- Date Issued: July 1, 2025
- Index Value for FY 2025–26: 376
- Effective From: April 1, 2026
- Applicable Period: Assessment Year 2026–27 onward
- Legal Authority: Issued under clause (v) of the Explanation to Section 48, amending the Gazette notification S.O. 1790(E) dated June 5, 2017
🔄 Historical CII Trends
| Financial Year | CII |
|---|---|
| 2022–23 | 348 |
| 2023–24 | 363 |
| 2024–25 | 363 |
| 2025–26 | 376 |
The increase from 363 to 376 reflects a significant adjustment to keep pace with inflation.
✨ Key Impacts & Benefits
1. Lower Tax Liability through Indexed Cost
A higher CII increases the inflation-adjusted purchase cost, which reduces taxable long-term capital gains and the consequent tax burden.
2. Simplified Capital-Gain Calculation
With the updated figure published now, taxpayers and CA professionals can effectively plan for FY 2025–26 transactions, avoiding last-minute recalculations.
3. Enhanced Tax Planning
The lead time ahead of FY 2026–27 enables informed tax planning—particularly for real estate, equity, and precious metal sales.
4. Fair Taxation
Adjusting for inflation ensures tax is levied on real gains rather than nominal ones, promoting fairness and economic equity.
📌 Practical Examples
- Real Estate
- Purchased in FY 2015–16 at ₹20 lakh (CII = 254)
- Sold in FY 2025–26 for ₹50 lakh
- Indexed Cost = ₹20 lakh × (376 / 254) ≈ ₹29.6 lakh
- Taxable Gain = ₹50 lakh – ₹29.6 lakh = ₹20.4 lakh
- Shares or Mutual Funds
- Bought in FY 2014–15 at ₹5 lakh (CII = 240)
- Sold in FY 2025–26 for ₹15 lakh
- Indexed Cost = ₹5 lakh × (376 / 240) ≈ ₹7.83 lakh
- Taxable Gain = ₹15 lakh – ₹7.83 lakh = ₹7.17 lakh
✅ What Taxpayers Should Do
- Review Transactions
Any asset sold in FY 2025–26 should use the updated CII 376 for LTCG calculation. - Update Financial Models
Asset sales projections should incorporate this new CII for accurate planning. - Disclose Accurately in ITR
During FY 2026–27 filing, use CII = 376 in Schedule CG for LTCG on long-term assets. - Advisory Consultations
If selling in FY 2025–26, consult qualified tax advisors to optimize Capital Gains calculations. - Align Client Communications
Accountants and advisors must inform clients selling assets in FY 2025–26 about this update.
📈 Broader Significance for Tax Ecosystem
- Consistency with Previous Trends
Following the trend—from 348 (FY 2022–23) to 363 (FY 2023–24, FY 2024–25)—CII 376 continues methodical inflation indexing. - Immediate Applicability
Although applicable from April 1, 2026, taxpayers planning for FY 2025–26 are advised to integrate the change early for clarity. - Proactive Filing Guidance
A clear, advanced notification avoids rushed disclosures. Tax professionals should issue client advisories. - Preventing Disputes
Formal notification allows taxpayers to confidently use the revised CII, reducing potential disputes or audits over under-indexation.
🔍 Final Takeaway
The CII 376 notification marks a pivotal adjustment for taxpayers disposing of long-term assets in FY 2025–26. Early integration into financial planning and tax compliance ensures legal alignment and tax efficiency.
