The Ministry of Finance has notified the Cost Inflation Index (CII) for the financial year 2025-26 as 376, through Notification No. 70/2025 dated July 1, 2025. The amendment was issued by the Central Board of Direct Taxes (CBDT) under powers conferred by clause (v) of the Explanation to Section 48 of the Income Tax Act, 1961.

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Section 48 of the Income Tax Act provides the framework for calculating the actual capital gain arising from the sale of a capital asset. It allows for the deduction of certain expenses from the sale proceeds to arrive at the net taxable gain.

These deductible expenses include the cost of acquiring the asset, the cost of any improvements made to it, and expenses incurred wholly and exclusively in connection with the transfer of the asset, such as brokerage or legal fees. By allowing these deductions, the Act ensures that only the real gain is taxed, not the gross sale amount.

The CII is used in India to adjust the purchase price of an asset for inflation. Since the value of money changes over time, CII helps reflect the true cost of the asset when it is sold. This adjustment ensures that only the actual gain, after considering inflation, is taxed. CII is mainly used to calculate long-term capital gains, which arise when an asset is sold after being held for a certain period. The CBDT releases the CII for each financial year before the year begins.

The notification inserts a new entry in the original CII table, adding serial number 25 with the index value of 376 for the financial year 2025-26. This revised index will be applicable from April 1, 2026, and will be relevant for calculating long-term capital gains for Assessment Year 2026-27 and subsequent years.

The principal notification, originally issued on June 5, 2017 (S.O. 1790(E)), was last amended via S.O. 2103(E) dated May 24, 2024.