Indexation Benefit for Legacy Property Purchases: What Still Applies
Indexation is no longer the default LTCG method, but it survives as an optional comparison for resident individuals and HUFs who bought property before 23 July 2024 — and choosing correctly between indexed and flat-rate tax can be worth lakhs on an older, low-cost-base asset.
CII base year (FY 2001-02 = 100)
363
Tax rate applied with indexation
20%
Acquisition cutoff for eligibility
23 Jul 2024
Who can still elect indexation
Residents only
What the data says
Indexed cost of acquisition = Original cost × (CII of year of sale ÷ CII of year of purchase), using the Cost Inflation Index published annually by the Income Tax Department.
Worked example: property bought in FY 2005-06 for ₹20L (CII 117), sold in FY 2025-26 for ₹1.4Cr (CII assumed 376). Indexed cost = 20L × (376 ÷ 117) ≈ ₹64.3L. Indexed LTCG = 1.4Cr − 64.3L = ₹75.7L, taxed at 20% = ₹15.14L, versus 12.5% on the unindexed gain of ₹1.2Cr = ₹15L — here the flat rate is marginally cheaper despite the older asset.
Indexation tends to favour the taxpayer more clearly on assets held for very long periods with a low original cost base relative to inflation — each case must be computed rather than assumed.
Compute the indexed cost and compare both tax outcomes at /knowledge/calculators/indexation.
How EstateVeda executes this
Confirm eligibility: the asset must have been acquired before 23 July 2024 and the seller must be a resident individual or HUF.
Look up the correct CII figures for both the year of purchase and year of sale.
Compute indexed LTCG and the resulting 20% tax liability, then compare against the 12.5% flat-rate liability on the unindexed gain.
File using whichever computation produces the lower tax, as permitted for grandfathered cases.
Risks we underwrite against
Using CII figures for the wrong assessment year produces a materially incorrect indexed cost.
Assuming indexation is always more favourable is wrong — for assets bought more recently before the cutoff, the flat 12.5% rate is frequently cheaper.
EstateVeda verdict
Always compute both methods explicitly for grandfathered assets — the better outcome depends on the specific purchase year and price, not a general rule of thumb.
Frequently asked questions
Can I still use indexation to calculate property tax in 2025?
Only if you are a resident individual or HUF who acquired the property before 23 July 2024; in that case you may compute tax both ways and pay whichever is lower.
Where do I find the Cost Inflation Index figures?
The CBDT publishes the Cost Inflation Index annually via notification; the EstateVeda indexation calculator at /knowledge/calculators/indexation keeps the current table built in.
Is indexation available to NRIs selling grandfathered property?
No, the grandfathering choice including indexation is restricted to resident individuals and HUFs; NRIs are taxed at the flat 12.5% rate without indexation regardless of purchase date.