Cost Inflation Index – What is it?
Income tax department has published a Cost Inflation Index(CII) value for each financial year since 1981-12. This value is a measure of annual inflation as measured by the Indian government.
The value was set to 100 for the financial year 1981-12.
The value for last financial year 2015-16 was 1081.
You should use this value to calculate capital gains in certain cases (like selling of gold after holding
Find out if investment return is more than inflation
Most important use of Cost Inflation Index (CII) is to find out the cumulative impact of inflation over years. What do I mean? Let us say, your made 50% gain after tax in the the last five years. How do you know this was good or bad? One way is to compare it against the inflation. Did you beat it or not? Five years ago, the Cost Inflation Index (CII) was 711 and today it is 1081. So the effective inflation over the last five years was 52% (= 1081/711 – 1). So, your amazing 50% after-tax return was not that amazing, after all! It just managed to beat the evil inflation!
Cost Inflation Table
|Financial Year||Cost Inflation Index||Implied Annual Inflation|