CBDT notifies Cost Inflation Index of 384 for FY27: Who can claim indexation benefits and how it affects capital gains tax

The Central Board of Direct Taxes (CBDT) has notified the Cost Inflation Index (CII) at 384 for the financial year 2026-27, a key figure used to calculate inflation-adjusted capital gains tax for eligible taxpayers. The index, notified under Section 72 of the Income-tax Act, 2025, will apply from April 1, 2026, for Tax Year 2026-27 and subsequent tax years.

The new index is higher than the 376 notified for FY2025-26, reflecting inflation over the past year. While the annual notification is a routine exercise, it assumes greater significance after changes to the capital gains tax regime announced in the Union Budget 2024, which restricted the availability of indexation benefits for many taxpayers.

What is the Cost Inflation Index (CII)?

The Cost Inflation Index is a number notified every year by the CBDT to account for inflation while calculating long-term capital gains (LTCG).

Instead of taxing the entire difference between the purchase and sale price of an asset, indexation adjusts the purchase cost for inflation. This increases the cost of acquisition, thereby reducing the taxable capital gain and, consequently, the tax liability.

For example, if a property was purchased several years ago, its indexed cost will be higher than its actual purchase price because inflation is factored into the calculation.

Why has the CII increased to 384?

The CII has been raised from 376 in FY2025-26 to 384 in FY2026-27, indicating an increase in inflation over the past year.

A higher index means taxpayers eligible for indexation can claim a larger inflation-adjusted purchase cost, potentially lowering the amount of taxable capital gains when they sell eligible assets during FY27.

Who can still claim indexation?

The notification does not mean that all taxpayers selling capital assets can automatically claim indexation.

Following the changes announced in the Union Budget 2024, indexation has been withdrawn for most newly acquired capital assets. However, certain categories of taxpayers continue to have access to the benefit.

One important category includes resident individuals and Hindu Undivided Families (HUFs) selling land or buildings acquired before July 23, 2024. Where eligible, they can choose the earlier capital gains tax regime with indexation if it results in a lower tax liability than the new regime.

For such taxpayers, the newly notified CII of 384 will be used to determine the indexed cost of acquisition while computing long-term capital gains.

Why does the notification matter?

Although the CII notification is issued every year, it provides certainty for taxpayers, chartered accountants, tax professionals and businesses involved in capital gains calculations.

The notified index becomes the official reference point for computing indexed acquisition costs wherever indexation is permitted under the Income-tax Act.

Taxpayers planning to sell eligible immovable property during FY2026-27 should factor the new CII into their tax calculations while comparing the tax payable under the old indexation regime and the newer capital gains framework.

Ultimately, the notification reinforces that while indexation has become more limited after the 2024 tax reforms, it continues to offer meaningful tax savings for eligible taxpayers disposing of certain long-held assets.