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Priyabrata Prusty
Updated Sep 21, 2021 | 07:53 IST
High inflation can help reduce your income tax liability. Here's how
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  • Long-term capital gains, which enjoy indexation benefit, come down due to high inflation.
  • Indexation takes into account inflation during the investment period and adjusts the purchase price of the asset upward
  • The government announces a cost inflation index (CII) every year.
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Long-term capital gains, which enjoy indexation benefit, come down due to high inflation. It may be noted that indexation takes into account inflation during the investment period and adjusts the purchase price of the asset upward to reflect the impact of inflation. As a result your net capital gains come down and you pay lower capital gains tax.,free slot machine games for fun only

football player drawing easy,How indexation benefit is applied in capital gains

The government announces a cost inflation index (CII) every year. This inflation rate is applicable for all the assets bought in the same financial year irrespective of the month of the year in which you bought the asset. For instance, an asset bought in the month of March FY18 and May FY18 will enjoy the same indexation benefit if they are sold anytime during the current financial year.,football player drawing easy

Index cost of an asset is calculated as follows:,bet 365 app download

soccer hero,Indexed cost of an asset= (Purchase Price*CII of year of sale)/CII of the year of purchase

Once you find out the indexed cost of an asset, 20% long-term capital gains tax is imposed on the difference of selling price and indexed cost of that asset. So more is the inflation more will be the indexed cost of the asset hence less will be tax on capital gains.,1xbet exe for windows 7 download

For the financial year 2020-21, CII increased by around 6% due to high inflation. But for FY20 and FY19, CII increased by around 4%.,bet365 bonus code no deposit

india odds,However, all investments are not eligible for indexation benefit. Investment such as shares, fixed deposits and bonds and debentures that mention an interest rate are not eligible for indexation benefit. This is the reason why prudent investors go for debt mutual funds instead of fixed deposits, where interest income is taxable as per your tax slab.

In case of shares and equity mutual funds, long-term capital gains of more than Rs 1 lakh in a financial year are taxed at a reduced rate of 10% so no indexation benefit is given on that.,10cric apk

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