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Indexation is used to adjust the purchase price of an investment to reflect the effect of inflation on it. A higher purchase price means lesser profits, which effectively means a lower tax. With the help of indexation, you will be able to lower your long-term capital gains, which brings down your taxable income.

Indexation meaning: what is indexation? Indexation is a method used by companies or investors to prevent tax loss on investments. It applies to long-term investments like debt funds or other assets, adjusting their purchase price to lower tax liability.

From a macroeconomics standpoint there are four main categories of indexation: wage indexation, financial instruments rate indexation, tax rate indexation, and. exchange rate indexation.

The formula for computing the indexation cost is (Index for the year of sale/ Index in the year of acquisition) x cost. How much is the cost of inflation in the year FY 2022-23? The cost of inflation in the year 2022 is 331.

Formula for computing indexed cost is (Index for the year of sale/ Index in the year of acquisition) x cost. For example, if a property purchased in 1991-92 for Rs 20 lakh were to be sold in A.Y. 2009 -10 for Rs 80 lakh, indexed cost = (582/199) x 20 = Rs 58.49 lakh.

Indexation is a factor that changes how much your insurance pays out if you need to make a claim in the future. Put simply, indexation accounts for changes in the economy and inflation, meaning that if your cost of living goes up then your policy payment goes up with it.

Social Security payments, for example, are indexed to the annual increase in the Consumer Price Index. In addition to indexation over time, prices and wages can be indexed over different geographic areas.