Central Board of Direct Taxes (CBDT) has announced the cost inflation index for 2013-2014. CBDT has announced that there is a significant increase in Index by 10.20%, In year 2012-13 the index was 852, and this year it is 939 hence there is a rise of approx 10.20% in the cost inflation index for 2013-14.
Why to Use Cost Inflation Index ?
Cost Inflation Index are used for calculating the inflationary gains. The index is useful for income-tax assesses in the computation of tax on long-term capital gains (for indexation purposes). Previous year (2011-12), the cost inflation index increased 8.5 per cent.
Calculation : A cost inflation index helps in reducing the inflationary gains, thereby reducing the long-term capital gains tax payout for a taxpayer. It is calculated by factoring out 75 per cent of average rise in consumer price index for urban non-manual employees for the immediately preceding financial year.