For the previous year, i.e., FY 2021-22, CII was notified as 317.

**Where is the cost inflation index used?**

The CII is used to compute an asset’s inflation-adjusted cost price. Long-term capital gains or losses are then calculated using the inflation-adjusted price. The CII figure is used to compute the inflation adjusted value of assets including land, buildings, houses, gold jewellery, debt mutual funds, and so on. It cannot, however, be utilised for gains on equity shares and equities mutual funds that are taxed at a rate of 10% without any indexation benefit.

This CII number will assist you determine the long-term capital gains on which you are required to pay taxes when you file your income tax returns (ITR) next year.

This notification will take effect on April 1, 2023 and will apply to the Assessment Year 2023-24 and future years.

**What is CII?**

It is an index that is used to calculate the inflation-adjusted rise in the value of an asset. When it comes to the cost inflation index, there are two factors to keep in mind.

This number will be used to calculate inflation-adjusted cost for only those assets that allow for inflation-adjusted (indexation benefit). As a result, the CII value cannot be used to calculate LTCG/LTCL on equity mutual funds because any sum above Rs 1 lakh each fiscal year is taxed at a flat rate of 10% without the advantage of indexation.

**How it is calculated**

The formula to calculate inflation-adjusted cost price is: (CII of the year of sale/CII for the year of purchase) * Actual cost price.

The government declared in Budget 2017 that the base year would be changed from 1981 to 2001 due to challenges in obtaining appropriate information by taxpayers. In the case of an asset purchased prior to April 1, 2001, the cost of the asset is regarded as the fair market value on April 1, 2001.