These property sellers may need to re-compute advance tax after delayed release of Cost Inflation Index for tax year 2026-27; here’s what to do

The Cost Inflation Index (CII) for the tax year 2026-2027 has been released almost one month after the deadline for paying advance tax for the first quarter. Cost Inflation Index matters the most especially for individual who have sold a property acquired on or before July 23, 2024, and sold it between April 1, 2026, and June 15, 2026, and want to use indexation benefits to pay a lower net tax.

The due date for advance tax for Q1 of the tax year 2026-2027 was June 15, 2026, and the Central Board of Direct Taxes (CBDT) notified CII number for the tax tear on July 16, 2026.

Advance tax is paid on incomes earned during the relevant quarter, while capital gains is treated differently; taxpayers are allowed to pay advance tax after capital gain arises.


Due to the delayed CII, those who opted for indexation benefits (inflation adjustment) on property sales faced a practical hurdle. They had to estimate their indexed capital gain and calculate advance tax liability without knowing the applicable inflation index and pay it as the CII for tax year 2026-2027 was not available on June 15, 2026.

This is the problem: guesswork for advance tax. If your guess is wrong and you underestimated the tax amount, you will become liable to pay interest. If you overestimated, then it’s no issue but you need to adjust it with the Q2, Q3, and Q4 advance tax obligations, or if it can’t be done, then claim a tax refund while filing the income tax return (ITR) on or before July 31, 2027 (the next year). If you somehow accurately guessed the correct CII and thus paid the exact amount of advance tax, then nothing more needs to be done.

Read below to know what to do in case you have underestimated the advance tax liability on property sales:

Practical difficulty for real estate transactions due to late release of CII

Chartered Accountant Suresh Surana says that the CII notification for the tax year 2026-27 at 384 came after the Q1 advance tax payment due date is already over (June 15, 2026). So, this may have created a limited practical difficulty for certain taxpayers undertaking real estate transactions.

Surana explains how this practical difficulty can arise: “At the time of computing the first instalment, taxpayers eligible for indexation may have had to estimate their capital gains based on an available CII for last year, and accordingly, the advance tax liability may require revision.”

However, Surana says that the impact would primarily be limited to resident individuals and HUFs (Hindu Undivided Families) transferring land or buildings acquired before July 23, 2024, who are eligible to compare the tax payable at 20% with indexation against 12.5% without indexation.

Surana says: “For other taxpayers to whom indexation is not available, the timing of the CII notification should ordinarily have no bearing on their advance tax computation.”

What to do if you have underestimated the advance tax liability?

Surana says that taxpayers may now recompute the expected capital gains using the notified CII and adjust any differential while paying the subsequent advance tax installments.

Where the relevant property transaction had already occurred before June 15, 2026, and the first instalment was lower than the statutory requirement, a technical exposure to interest for deferment of advance tax may arise, depending on the facts and the extent of the shortfall.

On the other hand, where the capital gain arises after the first instalment’s due date, the law permits the resulting tax liability to be discharged through the remaining instalments without attracting deferment interest, provided the prescribed conditions are fulfilled.

Accordingly, while the delayed notification may warrant a review of advance tax estimates, it should not necessarily result in a material issue for all taxpayers.

Surana says that the consequences would depend on the taxpayer’s eligibility for indexation, the date of the property transfer, the CII assumed while making the first payment, and whether the resulting shortfall, if any, is appropriately addressed in the subsequent installments of advance tax.

Who still benefits from CII-based indexation, and is it worth opting for?

Surana says that the relevance of the Cost Inflation Index (CII) has become particularly important in the context of the grandfathering provisions available for certain real estate transactions.

Under the current capital gains framework, resident individuals and HUFs selling land or buildings acquired before July 23, 2024, have the option to choose the more beneficial tax regime. Specifically, they can either pay tax at 12.5% without indexation or continue under the 20% rate with indexation, whichever results in a lower tax liability.

Surana says: “It is this grandfathering benefit that makes the annual notification of the Cost Inflation Index particularly significant.”

The CII is used to inflation-adjust the cost of acquisition and cost of improvement, thereby reducing the taxable long-term capital gain under the 20% indexed regime. Surana says: “A higher CII translates into a higher indexed cost and, consequently, a lower taxable gain.”

The following illustration demonstrates the impact of the recently notified Cost Inflation Index (CII) of 384 for tax year 2026-27 vis-à-vis the CII of 376 notified for FY 2025-26. The example assumes a residential property sold for Rs 2 crore during tax year 2026-27, which was originally acquired in FY 2010-11 for Rs 50 lakh (with a base CII of 167 for FY 2010-11):

Sr No.	Step/Component	Estimated Calculation	Actual Calculation
		(Using last year’s CII = 376) (in Rs)	(Using New CII = 384) (in Rs)
A	Sale Price	Rs 2 crore	Rs 2 crore
B	Less: Indexed Cost of Acquisition	1,12,57,485 (50 lakhs × 376 ÷ 167)	1,14,97,006 (50 lakhs × 384 ÷ 167)
C	Taxable LTCG (A - B)	87,42,515	85,02,994
D	Tax at 12.5% without Indexation (200 Lakhs less 50 lakhs x 12.5%)	18,75,000	18,75,000
E	Tax at 20% with Indexation(C × 20%)	17,48,503	17,00,599
F	Tax Liability (Lower of D and E)	17,48,503	17,00,599
G	Advance Tax for Q1 (15%)	2,62,275	2,55,090

Source: CA Suresh Surana

Thus, the notified CII of 384 increases the indexed cost of acquisition and reduces the tax liability by approximately Rs 47,904. Consequently, the corresponding Q1 advance tax requirement decreases by approximately Rs 7,185 as illustrated in the table.