Indexation benefit applies only to long-term capital assets; short-term capital gains are ineligible for indexation relief.

Indexation adjusts the cost of acquisition or improvement of a capital asset for inflation by applying a cost inflation index to compute an adjusted cost base. The benefit of indexation is confined to long-term capital assets and is unavailable for short-term capital assets; capital gains on transfers of short-term assets must be computed without indexation.

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