Cost inflation index or CII for the Fy 2020-21 has been notified by the ministry of finance as 301 in a release dated June 12, 2020. In the previous fiscal CII stood at 289.
The measure holds importance as it helps in computing inflation adjusted purchase price of the asset and then the long term capital gain when the property or such asset is sold out. The index is used for assets such as property, fold, debt mutual funds in possession for over 3 years which are redeemed in FY20-21.
According to the finance ministry notification, CII for FY 2020-21 shall come into force with effect from 1st day of April, 2021 and shall accordingly apply to the assessment year 2021-22 i.e FY2020-21 and subsequent years.
What Is CII or Cost Inflation Index?
The index helps in computing the notional hike in the asset value on account of inflation.
Pointers to note regarding the index:
1. Here, the index shall be used for only such assets where inflation adjusted indexation benefit is allowed.
2. Also, this CII number will be needed for computing LTCG for FY20-21for such assets where indexation benefit is allowed before levy of LTCG tax.