Hi, Friend,
When the price of commodities grows over time, money's buying power (the number of products that one unit of money can buy) declines. If two units of a product could be purchased for Rs 100 today, just one unit could be purchased for Rs 100 tomorrow due to inflation. Let me explain to you what is Cost Inflation Index? The Consumer Price Index (CPI) is a measure for evaluating inflation-related increases in the cost of goods and assets over time.
Cost Inflation Index PurposeThe Cost Inflation Index is a tool for comparing prices to inflation rates. To put it another way, as the rate of inflation grows over time, so will prices.
Who is the Cost Inflation Index notified by?The central government determines the cost inflation index, which is published in the official gazette. The Cost Inflation Index is equal to 75% of the year-over-year increase in the Consumer Price Index (urban).
To determine the increase in prices, the Consumer Price Index compares the current price of a basket of goods and services (which represents the economy) to the cost of the same basket of goods and services the previous year.
What is the Cost of Inflation Index and how is it used in income tax?Long-Term Capital Assets are recorded at their cost price in books. Despite growing inflation, they exist at cost and cannot be revalued. When these assets are sold, the profit amount remains high because the sale price is higher than the acquisition price. As a result, there will be a higher income tax. Long-term capital assets are subjected to the cost inflation index, which results in higher purchasing costs, fewer earnings, and reduced taxes for taxpayers. The cost inflation index benefit is applied to long-term capital assets in order to benefit taxpayers, resulting in greater purchase costs, fewer profits, and reduced taxes.
I hope this answer has provided you with sufficient details about what is Cost Inflation Index.
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What is Cost Inflation Index?
ruchi
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2 Year
2022-03-28T18:17:21+00:00 2022-04-04T10:10:12+00:00Comment
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