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CS Executive · Tax Laws and Practice · Capital Gains

Under the Income-tax Act, 2025, the indexed cost of acquisition is computed by multiplying cost of acquisition by the ratio of the Cost Inflation Index of the year of transfer to the Cost Inflation Index of:

The denominator is the Cost Inflation Index of the first year the asset was held by the assessee, or of the year beginning 1 April 2001, whichever is later. The improvement year is used only for indexing the cost of improvement, not the acquisition cost.

  1. Athe first year the asset was held by the assessee or the year beginning 1 April 2001, whichever is laterCorrect
  2. Bthe year in which the asset was transferred
  3. Cthe first year the asset was held, even if before 1 April 2001
  4. Dthe year in which the last improvement took place

Explanation

Section 72(8)(b) defines the denominator as the index for the first year the asset was held or the year beginning 1 April 2001, whichever is later. The improvement year applies only to indexed cost of improvement.

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