CBDT has notified the Cost Inflation Index (CII) for Financial Year 2026-27 by Notification No. 85/2026. The CII is the number that lets you inflate the purchase cost of a long-term asset so you are taxed only on the real gain and not on the part that is merely inflation. Since 23 July 2024, however, indexation has been withdrawn for most assets, with long-term capital gains taxed at a flat 12.5%. A narrow but valuable exception survives: a resident individual or HUF selling land or a building acquired before 23 July 2024 can still choose the old 20%-with-indexation route if it produces a lower tax. Non-residents cannot. This guide explains the CII in full — the complete year-wise table, how to compute an indexed cost, who the surviving option applies to, and worked examples with real figures.
Every year around the middle of the financial year the Central Board of Direct Taxes issues a short, unglamorous gazette notification fixing a single number: the Cost Inflation Index for that year. Notification No. 85/2026 is that notification for Financial Year 2026-27. For decades this number was one of the most valuable figures in Indian tax practice, because it decided how much of a long-term capital gain was real and how much was merely the rupee losing value. It could cut a property seller's tax bill by lakhs. Since the Finance (No. 2) Act, 2024 — effective for transfers on or after 23 July 2024 — the picture has changed dramatically. Long-term capital gains on nearly every asset are now taxed at a flat 12.5% without indexation. The CII has not been abolished, but its field of operation has shrunk to a specific, important case: a resident individual or Hindu Undivided Family selling land or a building acquired before 23 July 2024, who may choose whichever is lower — 12.5% without indexation, or the old 20% with indexation. That single option is why the CII still gets notified, still matters, and still needs to be understood. It is also why non-residents, who were deliberately excluded from that option, now face a materially different outcome on the very same property.
The notification is a piece of delegated legislation. The capital-gains computation provisions of the Income-tax Act empower the Central Government to notify, for each financial year, an index that reflects seventy-five per cent of the average rise in the Consumer Price Index for urban non-manual employees (in its modern form, the CPI-Urban) during the previous year. The CBDT does this by gazette notification each year, and Notification No. 85/2026 does it for FY 2026-27. Because it is a gazette notification issued under an express statutory power, it has the force of law — an assessing officer, a taxpayer and a tribunal are all bound by the figure it contains. It applies to transfers made during FY 2026-27 and therefore feeds into returns filed for Assessment Year 2027-28. The notification itself is a page long and contains no reasoning; all the substance lies in how the number is used. The exact figure for 2026-27 is carried in the official PDF linked at the foot of this page, and you should always take the number from the gazette rather than from a secondary source, because a single digit changes the tax.
To see why indexation was invented, imagine you bought a flat in Jaipur in 2005 for ₹20 lakh and sold it in 2024 for ₹80 lakh. On the face of it you made a gain of ₹60 lakh. But a very large part of that ₹60 lakh is not enrichment at all — it is the rupee having lost purchasing power over nineteen years. The ₹20 lakh you paid in 2005 would buy far more than ₹20 lakh buys today. If the tax system taxed the whole ₹60 lakh, it would be taxing you on inflation, which is not income in any economic sense. Indexation was the mechanism that corrected for this. It scaled up your original cost by the ratio of the index in the year of sale to the index in the year of purchase, converting a historic rupee figure into a current-rupee equivalent, and taxed only what was left. In other words, indexation distinguishes the nominal gain from the real gain, and taxes only the real one. That principle — that inflation is not income — is intellectually sound, and it is why the indexation regime survived in India for more than three decades and why its withdrawal in 2024 was controversial. The counter-argument, and the one the government adopted, is that indexation makes the computation complicated, invites disputes over cost and improvement records stretching back decades, and can be replaced with a lower headline rate that is simpler for everyone. Whether that trade is fair depends entirely on how long you held the asset and how fast it appreciated, as the worked examples below show.
An index needs a starting point. For many years the Indian CII was based on 1981-82 = 100, which meant taxpayers selling very old property had to produce evidence of cost or fair market value as at 1 April 1981 — records that were often forty years old, in a form nobody had kept, and about which no reliable valuation could be made. The Finance Act, 2017 shifted the base year forward to 2001-02 = 100. This was a genuine taxpayer-friendly change with two consequences. First, the evidentiary burden moved forward by twenty years: for any asset acquired before 1 April 2001, you may substitute the fair market value as on 1 April 2001 for the actual cost, and then index that from 2001-02 onwards. Second, because property values had risen sharply between 1981 and 2001, substituting the 2001 fair market value usually gave a much higher starting cost than the historic 1981 figure, and therefore a much lower taxable gain. For anyone still holding an inherited or ancestral property acquired before 2001, the 1-April-2001 fair market value — supported by a registered valuer's report — remains the single most important number in the computation, and it retains its relevance even now for those who can still use indexation.
Below is the complete notified series from the current base year onwards. Read it as: an asset bought in a year with index X and sold in a year with index Y has its cost multiplied by Y ÷ X.
Two features of the series are worth noticing. The index has roughly tripled and a half between 2001-02 and the mid-2020s, which means an asset bought in 2001 and sold today has its cost multiplied by close to 3.8 before any gain is computed. And the year-on-year increments have been modest in recent years — typically eleven to seventeen points, or three to five per cent — reflecting comparatively contained retail inflation. That matters because it tells you how much indexation is actually worth on a short-ish holding: on a three-year hold, indexation lifts your cost by perhaps twelve per cent, which is real but not transformative. On a twenty-year hold it can more than triple your cost, which is transformative. The value of indexation is overwhelmingly a function of time, and that single fact explains almost everything about who won and who lost from the 2024 change.
The formula is simple arithmetic. The indexed cost of acquisition equals the actual cost of acquisition multiplied by the CII of the year in which the asset is transferred, divided by the CII of the year in which the asset was first held by the assessee (or 2001-02, whichever is later). Take a plot bought in FY 2010-11 for ₹15,00,000 and sold in FY 2025-26. The indexed cost is ₹15,00,000 × (376 ÷ 167) = ₹33,77,245. If the plot sold for ₹60,00,000, the long-term capital gain under the indexation method is not ₹45,00,000 but ₹26,22,755 — a difference of nearly nineteen lakh in the taxable figure. From the sale consideration you also subtract the expenditure wholly and exclusively in connection with the transfer — brokerage, legal fees, stamp costs borne by the seller — and those transfer expenses are deducted at their actual value, not indexed. A frequent point of confusion is which year's index goes on top: it is always the index of the year of transfer, and the year of transfer is determined by the date the transfer legally takes effect, not the date the money reaches your account. For immovable property that is generally the date of the registered conveyance or the date possession is handed over under a valid agreement, whichever the facts support.
Capital improvements are indexed too, and separately. If you added a floor, rebuilt the structure, or made any capital addition to the property, that expenditure is indexed from the year in which the improvement was incurred — not from the year of purchase. So a property bought in FY 2010-11 with an extension built in FY 2016-17 has two indexed components: the original cost indexed from 167, and the improvement cost indexed from 264. Suppose the extension cost ₹8,00,000 in FY 2016-17 and the property is sold in FY 2025-26: the indexed cost of improvement is ₹8,00,000 × (376 ÷ 264) = ₹11,39,394. Combined with the indexed original cost of ₹33,77,245 above, the total indexed cost becomes ₹45,16,639, and on a ₹60,00,000 sale the gain shrinks to ₹14,83,361. Two cautions. First, only capital improvements count — a new wing, a permanent structure, a boundary wall. Routine repairs, repainting, replacing fittings, and annual maintenance are revenue expenditure and are not part of cost. Second, improvements incurred before 1 April 2001 are ignored entirely if you have opted to substitute the 1 April 2001 fair market value, because that value is deemed to embed everything done to the property up to that date. Taxpayers routinely lose money by failing to claim improvement cost at all, usually because they never kept the contractor bills; and they occasionally lose disputes by claiming ordinary repairs as improvement.
Consider Mr Sharma, a resident individual, who bought a house in Pune in FY 2005-06 for ₹22,00,000, spent ₹6,00,000 on a genuine capital extension in FY 2013-14, and sold the house in FY 2023-24 (that is, before the July 2024 change) for ₹1,10,00,000, paying ₹2,00,000 in brokerage. His indexed cost of acquisition is ₹22,00,000 × (348 ÷ 117) = ₹65,43,590. His indexed cost of improvement is ₹6,00,000 × (348 ÷ 220) = ₹9,49,091. Total indexed cost ₹74,92,681, plus ₹2,00,000 transfer expenses, gives a deductible total of ₹76,92,681. His long-term capital gain is therefore ₹33,07,319, taxed at the then-applicable 20% rate — about ₹6,61,464 before surcharge and cess. Now compute the same sale without indexation: gain of ₹1,10,00,000 minus ₹22,00,000 minus ₹6,00,000 minus ₹2,00,000 = ₹80,00,000, taxed at 12.5% = ₹10,00,000. On these facts indexation wins comfortably, and by a wide margin — roughly ₹3.4 lakh of tax. That is the shape of the typical long-hold, moderate-appreciation Indian property sale, and it is exactly the profile that the surviving grandfathering option was designed to protect.
The Finance (No. 2) Act, 2024 made the most consequential change to Indian capital-gains taxation in a generation, with effect from 23 July 2024. Three things happened at once. First, the rate structure was unified: long-term capital gains on virtually every class of asset — immovable property, gold, unlisted shares, listed shares and equity mutual funds — moved to a single rate of 12.5%, replacing the old patchwork of 20%, 10% and 10%-with-conditions. Second, the benefit of indexation was withdrawn for computing those gains. Third, the holding periods were simplified to two buckets. The exemption for listed equity and equity-oriented mutual funds was raised to ₹1,25,000 per year, and short-term gains on those instruments moved to 20%. Under the Income-tax Act, 2025 the operative provisions are Section 196 (formerly Section 111A) for short-term gains on listed equity and Section 198 (formerly Sections 112 and 112A) for long-term gains generally. The design logic was straightforward: a lower flat rate applied to the whole nominal gain in place of a higher rate applied to an inflation-adjusted gain. Whether that leaves you better or worse off depends on a single variable — how fast your asset appreciated relative to inflation. If your asset comfortably outran inflation, the flat 12.5% on the nominal gain is cheaper. If it barely kept pace with inflation over a long hold, the old 20%-with-indexation was far cheaper, and in extreme cases indexation could wipe the taxable gain out entirely.
Because the withdrawal produced obviously harsh results for long-held, slow-appreciating property, a targeted relief was added during the passage of the Bill. Its terms are narrow and every word matters. Where a resident individual or a Hindu Undivided Family transfers land or a building (or both) that was acquired before 23 July 2024, the tax payable on the resulting long-term capital gain shall not exceed the tax that would have been payable under the pre-amendment regime — that is, 20% computed with indexation. In practice this operates as a choice: compute the tax both ways and pay the lower. Note the four conditions stacked together. The transferor must be an individual or HUF — not a company, not a firm, not an LLP. The transferor must be resident in India for the year, determined under Section 6 of the Income-tax Act, 2025. The asset must be land or a building — gold, unlisted shares, and every other capital asset are outside the relief entirely. And the asset must have been acquired before 23 July 2024; anything bought on or after that date is squarely in the flat 12.5%-no-indexation world with no alternative. One further and often-missed limitation: the relief caps the tax, it does not resurrect the indexed computation for all purposes. Where the indexation route produces a loss that the non-indexed route does not, that notional indexed loss is not available for set-off or carry-forward.
The exclusion of non-residents from the grandfathering option is the sharpest edge of the 2024 reform, and it is not an oversight — the relief was drafted to apply only to a resident individual or HUF. An NRI selling the identical flat, bought on the identical date, with the identical cost and sale price as a resident neighbour, computes the gain on the full nominal difference and pays 12.5% on it, with no option to test the 20%-with-indexation alternative. On a long-held property where indexation would have absorbed most of the gain, this can more than double the tax. Non-residents also lost a second, older shelter in the same reform: for unlisted shares of an Indian company, non-residents previously computed gains in the foreign currency originally used to buy the shares, which neutralised rupee depreciation; that foreign-exchange-fluctuation benefit was withdrawn alongside indexation. Layered on top is the withholding problem. A buyer purchasing property from a non-resident must deduct TDS under Section 393 (the old Section 195) at the applicable long-term rate plus surcharge and cess on the full sale consideration unless the seller has obtained a certificate — an amount that routinely dwarfs the actual liability and locks up cash for a year or more. The remedy is a lower or nil deduction certificate under Section 395 (the old Section 197, Form 13), applied for before the sale closes, in which the officer authorises the buyer to deduct only on the real computed gain. For an NRI selling Indian property today, obtaining that certificate is the single highest-value step available, precisely because the indexation route that would have reduced the underlying liability is no longer open.
Mrs Iyer, resident in India, bought a Chennai apartment in FY 2011-12 for ₹35,00,000 and sells it in FY 2025-26 for ₹95,00,000, with ₹1,50,000 of transfer costs and no capital improvements. Route A, flat 12.5% without indexation: the gain is ₹95,00,000 − ₹35,00,000 − ₹1,50,000 = ₹58,50,000, and the tax at 12.5% is ₹7,31,250. Route B, 20% with indexation: the indexed cost is ₹35,00,000 × (376 ÷ 184) = ₹71,52,174; the gain is ₹95,00,000 − ₹71,52,174 − ₹1,50,000 = ₹21,97,826; the tax at 20% is ₹4,39,565. Because Mrs Iyer is a resident individual selling a building acquired before 23 July 2024, she may pay the lower figure — ₹4,39,565, a saving of ₹2,91,685 before surcharge and cess. Her property roughly 2.7-folded over fourteen years while the index rose about 2.04 times, so appreciation modestly outran inflation and indexation still wins. Now change one fact: suppose the same apartment sold for ₹1,60,00,000 instead. Route A gives a gain of ₹1,23,50,000 and tax of ₹15,43,750. Route B gives a gain of ₹86,97,826 and tax of ₹17,39,565. Here the flat rate wins, because the property comfortably outpaced inflation. This is the crossover in action, and it is why the calculation must be run both ways on the actual figures rather than assumed.
Take Mrs Iyer's first set of facts exactly — bought FY 2011-12 for ₹35,00,000, sold FY 2025-26 for ₹95,00,000, ₹1,50,000 of costs — but assume the seller is an NRI. The indexation route is unavailable. The gain is the full ₹58,50,000 and the tax is ₹7,31,250 plus surcharge and cess, against a resident's ₹4,39,565 on identical facts: roughly 66% more tax for no reason other than residential status. Worse, unless a certificate is obtained, the buyer must withhold under Section 393 on the entire ₹95,00,000, potentially over ₹12 lakh, against a real liability of about ₹7.3 lakh — leaving the NRI to reclaim the difference through a return and wait months for the refund. With a Section 395 lower-deduction certificate reflecting the computed gain of ₹58,50,000, the buyer deducts approximately the true tax and the seller keeps the rest of the proceeds at closing. The reinvestment exemptions remain fully available to non-residents — Section 82 (old Section 54) for reinvesting in a residential house, Section 85 (old Section 54EC) for specified bonds, and Section 86 (old Section 54F) where a non-house asset is sold — and for an NRI these have become materially more important than before, because they are now the main remaining lever for reducing the liability.
Mr Bansal, a resident, buys a plot in September 2024 for ₹40,00,000 and sells it in FY 2028-29 for ₹62,00,000. Because he acquired the asset on or after 23 July 2024, the grandfathering option does not apply to him at all, regardless of his residential status. His holding period exceeds 24 months so the gain is long-term; the computation is simply ₹62,00,000 − ₹40,00,000 = ₹22,00,000, less transfer expenses, taxed at 12.5%. No CII enters the calculation and no alternative route exists. This example illustrates the direction of travel: with each passing year a larger share of the property stock in the country will have been acquired after the cut-off date, and the grandfathering option — and with it the practical relevance of the CII — will steadily fade. The annual CII notification will continue to be issued, because the option remains alive for the very large pool of property acquired before July 2024, and that pool will take decades to work through the system. But for anyone buying today, indexation is simply not part of the planning vocabulary any more.
It is worth being precise about the current field of operation. The CII is relevant only where all of the following hold: the transferor is a resident individual or HUF; the asset is land or a building; the asset was acquired before 23 July 2024; the gain is long-term; and the indexed computation produces a lower tax than the flat rate. Everything else is outside. It does not apply to gold, jewellery or bullion, to unlisted shares, to listed shares or equity mutual funds, to business assets, or to any asset held by a company, firm or LLP. It does not apply to bonds and debentures, which were denied indexation long before 2024 (with a narrow exception historically carved out for capital indexed bonds and sovereign gold bonds). It does not apply to debt mutual funds purchased on or after 1 April 2023, which are treated as producing short-term gains taxable at slab rates irrespective of holding period — a separate regime introduced a year before the broader reform and often confused with it. And it never applied to depreciable business assets, where the block-of-assets mechanism produces a deemed short-term gain, nor to a slump sale, where the net worth of the undertaking is taken as cost without indexation. Knowing where the CII is irrelevant is as practically useful as knowing where it applies, because a great deal of wasted effort goes into indexing costs that were never indexable.
Alongside the rate change, the holding-period rules were consolidated into two buckets, and this matters because indexation and the 12.5% rate only ever attach to a gain that is long-term in the first place. Listed securities — listed equity shares, listed bonds and debentures, and units of equity-oriented mutual funds — become long-term after 12 months. Every other capital asset, including immovable property, unlisted shares, gold and physical assets, becomes long-term after 24 months. The old 36-month category was abolished. For immovable property this was a simplification rather than a change, since property had already moved to 24 months some years earlier; for unlisted shares and gold it was a genuine shortening from 36 months. Get the classification wrong and everything downstream is wrong: a short-term gain on property is taxed at your ordinary slab rate, which for a taxpayer in the top bracket can approach 30% plus surcharge and cess — well over double the long-term rate — and no indexation and no reinvestment exemption is available against it. Where a sale is close to the boundary, the date from which the period runs deserves careful attention, particularly for property bought under construction, where the date of allotment as against the date of possession has been the subject of considerable litigation.
For a resident individual or HUF selling pre-July-2024 land or building, the practical sequence is as follows. One, fix the date of transfer and confirm the holding period exceeds 24 months so the gain is long-term. Two, establish the sale consideration, remembering that where the stamp-duty value of the property exceeds the actual consideration beyond the tolerance band, the stamp-duty value is substituted as the deemed consideration — a rule that catches many undervalued family transactions. Three, establish the cost of acquisition: the actual purchase price, or, for property acquired before 1 April 2001, at your option the fair market value as on 1 April 2001, supported by a registered valuer's report. Four, identify capital improvements year by year, with bills. Five, compute the indexed cost of acquisition and each indexed cost of improvement using the CII of the year of transfer over the CII of the relevant year. Six, deduct transfer expenses at actual value. Seven, compute the tax at 20% on that indexed gain, and separately compute the tax at 12.5% on the non-indexed gain, and take the lower. Eight, apply any available reinvestment exemption and check whether the timing conditions can actually be met. Nine, work out advance-tax exposure, because a large capital gain arising late in the year carries its own instalment rules and interest consequences. Doing these in order avoids the commonest failure mode, which is computing an elegant indexed gain on an asset that turns out not to qualify for indexation at all.
Property that comes to you by inheritance, will, or gift raises the question of what to index and from when, and the answer is more favourable than most people expect. The transfer to you by inheritance or gift is not itself a taxable transfer. When you later sell, you step into the previous owner's shoes: the cost of acquisition is the cost to the previous owner, and the holding period includes the previous owner's period of holding. So a flat your father bought in 2004 and left to you in 2022, which you sell in 2025, is a long-term asset with a 2004 cost — not a 2022 asset with a nil cost. The subtler question is the year from which the index runs. The statutory language points to the year in which the asset was first held by the assessee, which read literally would mean the year of inheritance; but a long and consistent line of decisions has held that indexation should run from the year the previous owner acquired it, consistent with the fact that the previous owner's cost and holding period are both inherited. The taxpayer-favourable position is well established, though it remains a point on which assessing officers occasionally take a contrary view. Practically, this means an heir selling ancestral property should be indexing from the original purchase year, and should retain the chain of documents — the original sale deed, the will or succession certificate, and any valuation — that establishes it.
Whatever happens to indexation, the exemptions for reinvesting the gain survive intact, and with indexation withdrawn for most sellers they have become the principal planning tool. Section 82 (old Section 54) exempts the gain on a residential house where the gain is reinvested in another residential house in India within the prescribed windows — broadly one year before or two years after the sale for a purchase, or three years for construction. Section 86 (old Section 54F) gives an equivalent relief where a non-house long-term asset such as land or gold is sold and the net consideration is reinvested in a residential house; because it works on consideration rather than gain, partial reinvestment gives only proportionate relief and the conditions about owning other houses are strict. Section 85 (old Section 54EC) exempts gains on land or building reinvested in specified bonds within six months, subject to the annual ceiling and a five-year lock-in. All of these carry a trap worth naming: if the sale and the reinvestment straddle the due date for filing your return, the unutilised gain must be parked in a Capital Gains Account Scheme account with a bank before that due date, or the exemption is lost even if you later buy the house within the statutory window. This purely procedural step defeats more claims than any substantive condition.
Capital losses have their own arithmetic and it interacts awkwardly with the grandfathering option. A long-term capital loss can be set off only against long-term capital gains; a short-term capital loss can be set off against either short-term or long-term gains, which makes short-term losses the more flexible of the two. Unabsorbed losses of either kind may be carried forward for eight assessment years, but only if the return for the year of loss was filed within the due date — a deadline that quietly destroys the value of many losses. The specific trap under the current regime is this: where a resident individual sells pre-July-2024 property and the indexed computation produces a loss while the non-indexed computation produces a gain, the grandfathering relief only caps the tax; it does not permit that indexed loss to be carried forward and set off against other gains. The loss is notional for this purpose. Taxpayers who assume they can generate a carry-forward loss simply by applying indexation to a low-appreciation property will find the assumption is wrong, and it is worth testing before structuring a sale around it.
Almost every serious capital-gains dispute is at bottom an evidence dispute. Keep the original registered sale deed establishing cost and date; the bank trail of payments made; contractor bills and payment proof for any capital improvement, tagged to the year incurred; the brokerage invoice and legal fees on the sale; and, for pre-2001 assets, a registered valuer's report of the fair market value as at 1 April 2001. For inherited property, add the will or succession document and the previous owner's purchase deed. Where records genuinely do not exist — an old family property, a deed lost in a move — the practical route is a registered valuer's report supported by contemporaneous circle rates and comparable transactions from the relevant year; it is not conclusive, but it is evidence, and it is far better than a bare assertion in the return. The one thing not to do is to inflate an improvement claim without documentation, because improvement cost is a well-known focus of scrutiny and an unsupported claim invites both disallowance and penalty. Since the sale of immovable property is reported to the department through the statement of financial transactions and appears in your Annual Information Statement, the department already knows the transaction happened; the only question that remains is whether your computation of cost stands up.
The recurring errors are consistent enough to list. Using the wrong year's index — taking the index of the year the money was received rather than the year of transfer, or indexing the improvement from the purchase year rather than the year the improvement was made. Indexing an asset that never qualified — bonds, debentures, post-April-2023 debt funds, depreciable business assets. Assuming an NRI can use the 20%-with-indexation option, which is the single most expensive misunderstanding in the current landscape. Failing to run both computations and simply defaulting to 12.5% because it is the headline rate, when for a long-held slow-appreciating property the indexed route is often cheaper. Claiming repairs as improvement. Ignoring the stamp-duty-value substitution, which can raise the deemed consideration above the price actually agreed. Missing the Capital Gains Account Scheme deposit before the return due date and losing an exemption already earned. Filing late and forfeiting the carry-forward of a capital loss. And, for non-residents, closing the sale without a Section 395 lower-deduction certificate, which converts a manageable tax into a year-long refund claim on the entire sale price. Each of these is avoidable, and each is avoided by doing the computation before the transaction closes rather than after.
A capital gain on immovable property is reported in Schedule CG of ITR-2 (or ITR-3 if you also have business income); ITR-1 cannot carry it. The schedule asks separately for the sale consideration, the stamp-duty value, the cost of acquisition, the indexed cost where applicable, the cost of improvement, the transfer expenses, and any exemption claimed with the section and the reinvestment details. Where the grandfathering option is being exercised, the return utility provides for the comparison and applies the lower tax. Cross-check the figures against your AIS and Form 26AS before filing, since the registrar's report of the transaction and any TDS deducted by the buyer will already be sitting there, and any mismatch between your reported consideration and the reported transaction value is a reliable trigger for a notice. If TDS was deducted by the buyer — 1% for a resident seller above the threshold, or the far heavier Section 393 deduction for a non-resident — claim it in the return so the excess comes back as a refund. Finally, remember that a large gain may trigger advance-tax obligations in the quarter in which it arises; paying the instalment on time avoids interest that can quietly add several per cent to the cost of the transaction.
Notification No. 85/2026 is, in one sense, a smaller document than its predecessors. The number it carries no longer governs the tax on gold, on unlisted shares, on business assets, or on any property bought after July 2024. But it remains directly load-bearing for the enormous stock of Indian land and buildings acquired before that date and held by resident individuals and HUFs — which is to say, for the great majority of ordinary property sales that will happen in this country for many years to come. For every one of those sales, the figure in this notification is one half of a two-way comparison that decides the tax. That is why the notification still issues each year, why it still has the force of law, and why the full index series above still deserves a place in any serious capital-gains file. It is also a useful reminder of how much a single administratively-issued number can be worth: on a fourteen-year property hold, the difference between using the index and not using it was nearly three lakh of tax in the worked example above, on a moderately-sized apartment. That is not a rounding error, and it is not something to leave to a guess.
A property sale is usually the largest single transaction in a family's financial life, and the tax on it now depends on a comparison that did not exist two years ago, conditions that turn on residential status and acquisition date, exemptions with unforgiving timing rules, and a withholding regime that can freeze a large part of the sale price if it is not handled before closing. A chartered accountant working on this will do a small number of high-value things: confirm whether the grandfathering option is available to you at all, run both computations on your actual documents and quantify the difference, reconstruct and substantiate the cost and improvement history, identify which of Sections 82, 85 and 86 fits your reinvestment plan and set the Capital Gains Account Scheme deposit up in time, and — where you are a non-resident — obtain the Section 395 certificate before the sale closes so that the buyer withholds on the gain rather than the gross price. Almost all of that has to happen before the transaction completes to be worth anything. Once the deed is registered and the money has moved, the options narrow sharply and the work becomes a matter of recovering refunds rather than avoiding overpayment in the first place.
It is the figure notified by CBDT Notification No. 85/2026 for Financial Year 2026-27, applicable to transfers made in that year and returns for Assessment Year 2027-28. Take the exact number from the official gazette PDF linked on this page, since a single digit changes the computation. The index runs on a base of 2001-02 = 100.
Only in one narrow case. For transfers on or after 23 July 2024, long-term capital gains are taxed at a flat 12.5% without indexation. The exception is a resident individual or HUF selling land or a building acquired before 23 July 2024, who may pay the lower of 12.5% without indexation or 20% with indexation. Every other seller and every other asset is outside it.
No. The grandfathering relief is expressly limited to a resident individual or HUF. An NRI selling the identical property on identical facts computes the gain on the full nominal difference and pays 12.5%, which can be substantially more tax than a resident pays on the same sale. NRIs also lost the foreign-exchange-fluctuation benefit on unlisted shares in the same reform.
Multiply the actual cost by the CII of the year of transfer and divide by the CII of the year the asset was first held (or 2001-02, whichever is later). For example, a property bought in FY 2011-12 for ₹35,00,000 and sold in FY 2025-26 has an indexed cost of ₹35,00,000 × 376 ÷ 184 = ₹71,52,174. Capital improvements are indexed separately from the year each was incurred.
You may substitute the fair market value as on 1 April 2001 for the actual cost, and index from the base year of 100. This is usually far more favourable than the historic cost. Support the value with a registered valuer's report. Improvements incurred before 1 April 2001 are then ignored, since the 2001 value is treated as embedding them.
It depends entirely on how fast the asset appreciated relative to inflation. If the property comfortably outran the index, the flat 12.5% on the nominal gain is cheaper. If it barely kept pace over a long holding, 20% on the indexed gain is much cheaper. There is no general rule; run both computations on your actual figures.
No. Since July 2024 the grandfathering option covers only land and buildings. Gains on gold, unlisted shares, listed shares and equity mutual funds are all taxed at 12.5% without indexation, with a ₹1,25,000 annual exemption for listed equity and equity-oriented funds. Debt funds bought on or after 1 April 2023 are taxed at slab rates regardless of holding period.
Twelve months for listed securities including listed shares, listed bonds and equity-oriented mutual fund units; twenty-four months for everything else, including immovable property, unlisted shares and gold. The old thirty-six-month category was removed. A short-term gain on property is taxed at your ordinary slab rate with no indexation and no reinvestment exemption.
We run the 12.5%-flat and 20%-with-indexation computations on your actual documents, apply Sections 82 / 85 / 86, and — for NRIs — get the Section 395 lower-TDS certificate before the sale closes.
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