A S BANKA ADVISORS

The CBDT has notified the Cost Inflation Index (CII) for FY 2026-27 at 384, up from 376 the previous year. The notification, S.O. 3889(E) dated 15 July 2026, was issued under Section 72(8)(a) of the Income-tax Act, 2025, and applies to Tax Year 2026-27 from 1 April 2026. Every year this number arrives to headlines calling it capital gains relief. For most of the founders and companies we advise, it now changes almost nothing, and understanding why is the actual planning point.

What the number is meant to do

The CII exists to adjust the purchase cost of a capital asset upward for inflation, so that when you sell, you are taxed on the real gain and not the part of the gain that is simply rupee inflation. Base year is FY 2001-02 at an index of 100. An asset bought when the index was 167 and sold when it is 384 has its cost re-based by 384/167. That mechanism, on paper, lowers the taxable gain.

The part the headline leaves out

Budget 2024 quietly demolished most of this. With effect from 23 July 2024, indexation was withdrawn for nearly every asset class. Listed equity and equity mutual funds, gold, debt funds, and, critically for founders, unlisted shares including ESOP shares and secondary sales, are now taxed at a flat 12.5% long-term rate with no indexation at all. So is anything sold by a company, LLP, firm, or non-resident. For all of these, CII 384 is irrelevant. The index can rise every year and it will not move your tax by a single rupee.

The one lane where CII 384 still works

Indexation survives in exactly one narrow case, and all three conditions must hold:

• The asset is land or a building (immovable property only)
• It was acquired before 23 July 2024
• The seller is a resident individual or a Hindu Undivided Family

For that seller, on that property, the law offers a choice: pay 20% with indexation, or 12.5% without, whichever produces the lower tax. Take a resident selling land bought in FY 2010-11 (CII 167) for Rs 30 lakh, now sold for Rs 1.2 crore in FY 2026-27. With indexation, the cost re-bases to about Rs 68.98 lakh and the 20% route costs roughly Rs 10.20 lakh; without indexation, the 12.5% route costs Rs 11.25 lakh. Here indexation wins by about a lakh. On a different property the maths can flip. That is the whole point: you must run both routes, every time.

What this means for your startup

If you are a founder modelling a secondary, an ESOP liquidity event, or an exit, take the CII out of your spreadsheet. Your unlisted shares are on the flat 12.5% track, full stop. Assuming an indexation benefit that no longer exists will make your net-of-tax proceeds look better than they are, and that error compounds when you are negotiating a secondary price or planning a cross-border sale. Model the real number.

If you personally hold pre-2024 land or a building, the opposite discipline applies: do not default to the flat rate because it sounds simpler. Compute both routes and claim the lower. And keep your purchase deeds, improvement bills, and acquisition dates clean, because the 23 July 2024 cut-off is what decides whether you are eligible at all.

The four-point check before you sell

1. Is the asset land or building, acquired before 23 July 2024, held by a resident individual or HUF? If not, you are on flat 12.5% with no indexation.
2. If yes, pull the CII of your purchase year and apply 384 for the sale year.
3. Compute tax both ways and pick the lower.
4. For any founder secondary, ESOP sale, or cross-border exit, confirm the route before you sign, not after.

Download the full carousel PDF for the eligibility map, the worked example, and the traps to avoid.

Planning a capital gains event this year and want the route confirmed before you commit? Talk to an Expert. CA Adityavikram Banka, Founder, A S Banka Advisors Private Limited. Book a quick call: https://calendly.com/asbanka-info/30min