CBDT Notifies Cost Inflation Index at 384 for FY 2026–27

The Central Board of Direct Taxes (CBDT) has notified the Cost Inflation Index (CII) at 384 for Financial Year 2026–27, compared with 376 for FY 2025–26. The revised index represents an increase of approximately 2.13% over the previous financial year.

The new CII was specified through Notification No. 85/2026-Income Tax, dated July 15, 2026, under Section 72(8)(a) of the Income-tax Act, 2025. It applies from April 1, 2026, for Tax Year 2026–27 and subsequent tax years wherever indexation provisions are relevant. Income Tax Department announcement

CII is used to account for inflation while determining the indexed cost of acquisition and improvement of eligible capital assets. The mechanism increases the historical cost of an asset in line with inflation, thereby helping calculate the taxable capital gain more accurately.

However, indexation is no longer generally available for capital assets transferred on or after July 23, 2024. A limited protective provision continues for resident individuals and Hindu Undivided Families selling land or buildings acquired before that date.

In eligible cases, such taxpayers may compare the tax payable under:

• The 12.5% long-term capital gains tax rate without indexation; and
• The earlier 20% tax rate with indexation.

The lower tax liability calculated under these alternatives may apply, subject to the prescribed conditions. The Income Tax Department’s capital gains guidance confirms that indexation now continues mainly for this specified category of land and building transactions. Income Tax Department guidance  CA Sansaar