CBDT has notified the Cost Inflation Index (CII) for the financial year 2026-27 at 384, a move that remains significant for a specific category of taxpayers despite major changes introduced under the Finance Act, 2024. While the indexation benefit has been withdrawn for most long-term capital assets sold after July 23, 2024, the revised index continues to play an important role for resident individuals and Hindu Undivided Families (HUFs) who qualify under the grandfathering provisions.
The latest notification from CBDT provides clarity for taxpayers calculating long-term capital gains on eligible property transactions. At the same time, the tax authority’s latest collection figures indicate strong growth in direct tax revenues, reflecting healthy economic activity and improved tax compliance across the country.
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CBDT Announces Cost Inflation Index of 384
CBDT has officially increased the Cost Inflation Index to 384 for the financial year 2026-27. The Cost Inflation Index is a tool used under the Income Tax Act to adjust the purchase cost of certain long-term capital assets for inflation while calculating capital gains tax.
The objective of the index is straightforward. Over time, inflation reduces the purchasing power of money, meaning the original cost of buying a property decades ago is not directly comparable to its current market value. The Cost Inflation Index adjusts that purchase price to reflect inflation, resulting in a more accurate calculation of the actual capital gain earned by the seller.
By notifying the revised index every financial year, CBDT ensures that eligible taxpayers can calculate inflation-adjusted acquisition costs wherever indexation rules continue to apply.
Understanding Why the Cost Inflation Index Matters
When someone purchases land or a residential property, its value usually rises over several years due to inflation, infrastructure development, market demand and urban expansion. If tax were calculated simply by subtracting the original purchase price from the selling price, the taxable gain would often appear much higher than the real economic gain.
This is where the Cost Inflation Index becomes useful.
The index adjusts the original purchase price using inflation factors published annually by CBDT. As a result, the indexed purchase cost becomes higher, reducing the taxable capital gain and ultimately lowering the tax payable.
For many years, this mechanism offered considerable tax relief to long-term property owners, especially those who had purchased land or buildings decades earlier at comparatively lower prices.
Finance Act 2024 Changed the Tax Rules
Although CBDT continues to notify the Cost Inflation Index every year, its practical application has become much narrower after amendments introduced through the Finance Act, 2024.
For most long-term capital assets transferred on or after July 23, 2024, taxpayers can no longer claim indexation benefits.
Instead, these transactions are generally taxed at a flat long-term capital gains tax rate of 12.5 per cent without indexation.
This marked one of the biggest changes in India’s capital gains taxation system in recent years. The government simplified the tax structure by replacing different tax rates and indexation provisions with a uniform tax rate for most eligible assets.
As a result, many taxpayers selling long-term investments after July 23, 2024, will calculate their tax without applying the Cost Inflation Index.
Where CBDT’s New Cost Inflation Index Still Applies
Despite the removal of indexation for most transactions, CBDT’s latest notification remains important because one major exception continues.
Resident individuals and Hindu Undivided Families selling land or buildings acquired before July 23, 2024, are covered under a grandfathering provision.
These taxpayers can choose whichever tax option results in a lower tax liability:
- Pay 12.5 per cent tax without indexation, or
- Pay 20 per cent tax with indexation using the Cost Inflation Index.
This flexibility allows eligible taxpayers to compare both methods before filing their income tax returns.
For some property owners, especially those who purchased real estate many years ago, the indexed purchase price may substantially reduce taxable gains, making the 20 per cent tax regime more beneficial.
For others who acquired property more recently, paying 12.5 per cent without indexation could result in lower overall tax.
CBDT’s revised Cost Inflation Index of 384 therefore becomes a critical number for calculating tax under this grandfathered option.
Example of How CBDT’s Indexation Benefit Works
Consider a taxpayer who purchased a residential plot several years ago for ₹20 lakh and plans to sell it during FY 2026-27.
If the property qualifies under the grandfathering provisions, the taxpayer can use the Cost Inflation Index notified by CBDT to calculate the indexed purchase cost.
Instead of considering the original purchase cost of ₹20 lakh, the inflation-adjusted value becomes significantly higher depending on the acquisition year and applicable Cost Inflation Index.
Since the taxable capital gain is calculated after deducting this indexed cost, the overall tax burden may reduce considerably.
The taxpayer can then compare this amount with the tax payable under the new 12.5 per cent regime and choose whichever option is financially advantageous.
This choice provides flexibility while ensuring eligible taxpayers are not adversely affected by the shift in tax policy.
CBDT Continues to Modernise India’s Tax System
The latest Cost Inflation Index notification also reflects CBDT’s ongoing role in maintaining transparency and certainty in India’s taxation framework.
Every year, the board issues various notifications, circulars and procedural updates to help taxpayers, professionals and businesses comply with changing tax laws.
Apart from notifying the Cost Inflation Index, CBDT has increasingly focused on digital tax administration, faster processing of returns, improved taxpayer services and greater use of technology to detect tax evasion.
The board has also expanded online verification systems, faceless assessments and digital communication channels, reducing paperwork while improving efficiency across the tax administration process.
Strong Growth in Direct Tax Collections
Alongside the Cost Inflation Index notification, CBDT has released encouraging figures on India’s direct tax collections.
According to data available up to July 13, India’s net direct tax collections reached ₹6.51 lakh crore, registering an impressive 16.4 per cent year-on-year growth during the current financial year.
The increase reflects stronger economic activity, improved corporate profitability and better tax compliance by businesses as well as individual taxpayers.
The latest figures indicate healthy performance across multiple tax categories.
Corporate Tax Collections
CBDT reported that net corporate tax collections increased by more than 22 per cent, reaching approximately ₹2.40 lakh crore.
Higher corporate earnings across several sectors, combined with improved compliance and digital monitoring, contributed to this robust growth.
Non-Corporate Tax Collections
Collections from non-corporate taxpayers also showed steady momentum.
CBDT data revealed that net non-corporate tax collections rose by nearly 12 per cent, touching around ₹3.85 lakh crore.
This category includes taxes paid by individuals, professionals, partnership firms and other non-corporate entities.
The rise suggests continued expansion in taxable income and wider participation within the formal economy.
Securities Transaction Tax Registers Sharp Rise
One of the fastest-growing revenue streams reported by CBDT was the Securities Transaction Tax (STT).
STT collections increased by over 44 per cent, crossing ₹26,000 crore.
The sharp jump reflects sustained investor participation in Indian stock markets, rising trading volumes and continued activity across equity and derivatives segments.
Higher transaction volumes automatically translate into greater Securities Transaction Tax collections, strengthening government revenue.
Why the CBDT Notification Matters
Although indexation is no longer available for most long-term capital asset transfers after July 23, 2024, the revised Cost Inflation Index issued by CBDT remains highly relevant for taxpayers covered under the grandfathering provisions.
Property owners planning to sell land or buildings acquired before the policy change should carefully compare both available tax options before completing their transactions.
The latest notification also demonstrates that CBDT continues to provide regulatory certainty while supporting efficient tax administration. Combined with rising direct tax collections and improved compliance, the updated Cost Inflation Index forms part of a broader effort to maintain a transparent and predictable taxation system that balances revenue collection with taxpayer convenience.
