In case of capital gains when long term capital gain is to be computed, then, indexation comes into picture to compute the indexed cost of asset as well as indexed cost of improvement. Indexation is not possible without a predefined index. Indexation is necessary to compute the present value of asset as on the date or year in which the asset is sold as compared to the year in which it is purchased. Cost Inflation Index (CII) chart begins from year 1981 with base index as 100. Indexation can help you reduce the tax liability by enhancing or bringing the value of the asset to present time.
Cost Inflation Index (CII) is notified by Government of India by publication in official gazette every year.
Cost Inflation Index Table for capital Gains
| Financial Year | Cost Inflation Index | Financial Year | Cost Inflation Index |
| 1981 – 82 | 100 | 1982 – 83 | 109 |
| 1983 – 84 | 116 | 1984 – 85 | 125 |
| 1985 – 86 | 133 | 1986 – 87 | 140 |
| 1987 – 88 | 150 | 1988 – 89 | 161 |
| 1989 – 90 | 172 | 1990 – 91 | 182 |
| 1991 – 92 | 199 | 1992 – 93 | 223 |
| 1993 – 94 | 244 | 1994 – 95 | 259 |
| 1995 – 96 | 281 | 1996 – 97 | 305 |
| 1997 – 98 | 331 | 1998 – 99 | 351 |
| 1999 – 00 | 389 | 2000 – 01 | 406 |
| 2001 – 02 | 426 | 2002 – 03 | 447 |
| 2003 – 04 | 463 | 2004 – 05 | 480 |
| 2005 – 06 | 497 | 2006 – 07 | 519 |
| 2007 – 08 | 551 | 2008 – 09 | 582 |
| 2009 – 10 | 632 | 2010 – 11 | 711 |
| 2011 – 12 | 785 | 2012 – 13 | 852 |
The above chart can be used for computing the indexed value of asset and improvement. Formula to compute indexed cost and improvement has been in the following article.
