Q: What is the difference between LTCG and CII ?

Ans:  LTCG is long term capital gain tax. So, LTCG is a tax which is levied on asset of long term.

CII is used to adjust the capital asset's cost price against the inflation with the help of cost inflation index number and is referred to indexation.

CII is used for capital assets like real estate, gold, debt mutual funds or debentures.

The benefit of CII is not in shares.

Gain of asset = Selling price-Purchase price

Real gain of asset= Selling Price - Inflation Adjusted Purchase Price

The increase in the inflation rate will lead to increase in the prices of capital assets and eventually result in lesser capital gain as well as taxes.

Cost inflation index= 75 percent of the average rise in the consumer price index(urban) for the immediately preceding year.

CPI index is used to calculate the current price of specific goods and services and the next year price of goods and services. The difference between these two is consumer price index.

Inflation Adjusted Purchase Price=  Purchase price * CII for the year of sale/transfer/CII for the year of Purchase/Base Year

CII is not applicable for shares and equity mutual benefit.

CII is applicable for debt mutual fund as well as for real estate.

In debt mutual fund, the holding should be of minimum 3 years and the applicable tax indexation benefit is 20 percent.

The real estate should be holded atleast for 2 years and applicable tax indexation benefit is 20 percent.








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