Multiply the cost by the ratio of the two index numbers
Indexed cost is the purchase price multiplied by the sale-year index over the purchase-year index. If the index ran from 200 to 350 across your holding period, a cost of 10,00,000 becomes 17,50,000, and only the amount above that is taxed.
indexed cost = cost x (CII sale / CII purchase) ; indexed gain = sale - indexed cost
The index numbers themselves have no meaning in isolation — only their ratio matters, so the base year they are anchored to is irrelevant as long as both come from the same notified series.
A nominal gain on a long hold is partly not a gain at all
An asset held for fifteen years may double in price while prices generally rose 60%. Without indexation, the whole doubling is taxed, including the part that merely kept pace — which means being taxed on maintaining your position rather than improving it.
Indexation removes that portion from the charge. It is why an indexed long-term rate and an unindexed one are not comparable by their headline percentages: a lower unindexed rate can easily produce a larger bill on a long-held asset.
Indexation is a long-term concession, and the rules keep moving
The benefit generally applies only to assets held beyond a specified long-term threshold, and only to asset classes the law names. Short-term gains are taxed on the plain difference with no index applied at all.
Several jurisdictions have narrowed or withdrawn indexation in recent years, sometimes with a choice between an indexed rate and a lower unindexed one. Where a choice exists, running both is the only way to know which is cheaper for your particular holding.
One asset, no improvements, no exemptions
The calculation indexes a single purchase price. Capital improvements made in later years are indexed from the year each was incurred, not from the original purchase, so a property with a major renovation needs each cost indexed separately and summed.
Transfer costs, reinvestment exemptions that can eliminate the charge entirely, and any surcharge are not modelled. Check the index numbers against the official notification for the exact financial years involved before relying on the result.
Frequently Asked Questions
Where do I get the index values?
From the official cost inflation index published by your tax authority for each year. Using unofficial or wrong-year values will give an incorrect indexed cost, so always source them officially.
What rate applies to the indexed gain?
Typically a long-term capital gains rate, which varies by country and asset. The 20% default is India’s rate with indexation under its transitional option for property bought before 23 July 2024; enter the rate that applies to indexed gains in your jurisdiction.
Does the currency matter?
No, as long as the purchase and sale prices are in the same currency. The index ratio is unitless, so the indexed cost and gain come out in your currency.
Sources & References
Figures on this page are checked against primary, authoritative sources. Links open in a new tab.
Indexation is available for your asset and tax year; many regimes restrict or have removed it.
The index values entered are the correct official figures for the purchase and sale years.
A negative indexed gain is treated as zero; indexation cannot create a deductible loss here.
Figures are an estimate in one local currency for general reference, not a guaranteed tax liability.
Where it stops
India removed LTCG indexation for transfers on or after 23 July 2024 (with the rate cut to 12.5%); it now survives only for immovable property acquired before that date under a transitional option, so for India use this tool only in that case.
It uses a simple index ratio and does not handle part-disposals or improvements indexed separately.
It does not check whether indexation is permitted; that depends on your country and asset.
Index values and the base year change over time and must be taken from the official source; treat any Cost Inflation Index figure as "verify with CBDT" (the FY2025-26 CII is reported as about 376 but is not gov-fetched here).
Results are not tax advice; confirm rates, the index, and eligibility with the tax authority.
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Tax rules vary by country, state, tax year, filing status, income type, deductions, and exemptions. This calculator is educational and uses the values you enter. Always verify final tax treatment with official sources or a qualified tax professional.
Published the calculator with its formula, worked example, assumptions, limitations and a bespoke guide, and added an automated formula test suite covering it.
Tested the indexed cost as the purchase price scaled by the ratio of the two cost inflation index values, and the tax on what survives it.
Tested that an unchanged index leaves the cost untouched, and that indexation can never increase the taxable gain.
Frequently Asked Questions now show on the page: 3 answers, checked in a page-by-page audit.
What the calculation assumes and where it stops now show on the page.
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