What is the primary purpose of the Cost Inflation Index (CII) in finance?

To measure the daily fluctuations in stock prices To calculate the short-term capital gains from trading To adjust the purchase price of assets for inflation when calculating long-term capital gains To determine the interest rates offered on savings accounts

How does the CII help reduce tax liabilities for assessees on long-term capital gains (LTCG)?

It exempts LTCG from any taxation It provides a flat tax deduction on all LTCG It allows for the adjustment of the asset's purchase price based on inflation, potentially lowering the taxable gain It increases the tax rate on short-term capital gains, making LTCG more favorable

What is the base year in the context of the CII, and why is it important?

It's the year with the lowest inflation rate, used for comparison It's the year when the CII was first introduced It's the first year in the index with a value set at 100, used as a reference point for calculating inflation adjustments It's the year with the highest economic growth, used as a benchmark

Which of the following financial instruments does the CII apply to for indexation benefits?

All types of debentures and bonds Short-term savings accounts Fixed deposits with a maturity of less than 1 year Long-term capital assets like real estate and debt mutual funds