Suppose a property was purchased in FY1992 for Rs 20 lakhs. lange halt The CII for that year is 1999.
Suppose this property was then sold for Rs 80 lakhs in FY2009. The CII for that year is 582.
Now, applying the formula for indexed cost, we get:
(CII for the year of sale/CII for the year of purchase) x actual cost
= (582/199) x Rs 20 lakhs = Rs 58.49 lakhs.
This means the seller will have to pay long-term capital gains tax on the difference between Rs 58.49 lakh and Rs 80 lakhs, after applying the indexation benefit. That way his LTCG liability will be Rs 21.51 lakhs.