Indexed Cost of Acquisition (ICA) and Indexed Cost of Improvement (ICI) [Section 48]

When asset is acquired bv assessee himself

(a) Acquired prior to 1.4.1981
Indexed Cost Acquisition
Fair Market Value on 01.04.1981 or cost of acquisition whichever is high × Cost of Inflation Index for the
year of transfer/100.

(b) Acquired after 1.4.1981,
Indexed cost of Acquisition = (Cost of Acquisition ×CII for year of transfer) / CII for year of acquisition

Indexed Cost of Improvement in both the above cases
=(Cost of Improvement ×CII for year of transfer) / CII for year of Improvement
ICI can be computed only if it is incurred after 01.04.1981.

When assessee received the asset u/s 47

(c) Asset acquired prior to 1.4.1981 by previous owner and received by the assessee prior to 1.4.1981.
lCA = FMV on 1.4.81 or Cost of acquisition by previous owner whichever is high x CII for year of transfer/
100.

(d) Asset acquired prior to 1.4.81 by previous owner and received by the assessee after 1.4.81.
ICA = FMV on 1.4.81 or Cost of acquisition by previous owner whichever is high x CII for Year of transfer/
CII of year in which it is first held by the assessee.

(e) Asset acquired after 1.4.1981 by previous owner and received by assessee after 1.4.1981.
Indexed Cost of Acquisition = (Cost of acquisition to the previous owner×CII for year of transfer) / CII of year in which the asset is first held by the assessee

In the above cases: Indexed Cost of Improvement = Cost of improvement × CII for year of transfer/ cn for year
of improvement.

List the circumstances in which benefit of indexation is not available

Nature of LTCA TransferredAssessee Not Eligible for
Bonds/Debentures except Capital Indexed Bonds Issued by Govt.All Assesses
Shares/Debentures of Indian Company acquired by using Convertible Forex under First Proviso to Section 48Non-Residents
Depreciable AssetsAll Assesses
Slump SaleAll Assesses
Units Purchased in Foreign Currency u/s 115ABOff Shore Fund
GDRs purchased in Foreign Currency u/s 115AC IndividualNon-Residents and Resident
Securites u/s 115ADForeign Institutional Investors
Foreign Exchanae Asset u/s 1150Non-Resident Indian

Cost Inflation Index as notified by the Central Government is as under:

Financial YearCost inflation Index (CII)Financial YearCost inflation Index (CII)Financial YearCost inflation Index (CII)
1981-19821001992-19932232003-2004463
1982-19831091993-19942442004-2005480
1983-19841161994-19952592005-2006497
1984-19851251995-19962812006-2007519
1985-19861331996-19973052007-2008551
1986-19871401997-19983312008-2009582
1987-19881501998-19993512009-2010632
1988-19891611999-20003892010-2011711
1989-19901722000-20014062011-2012785
1990-19911822001-20024262012-2013852
1991-19921992002-20034472013-2014939

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