Cost of Living & Indexation
Cost of living brings inflation (Topic 3) down to the personal and local level — your actual spending pattern and location can mean your real cost-of-living increase differs meaningfully from the headline CPI figure. This guide introduces indexation — the general technique of adjusting a value over time to keep pace with a price index — and traces it through several real contexts: Dearness Allowance (which indexes pay, and the base for retirement benefits like EPF and gratuity, for many employees), the Cost Inflation Index (whose role in capital gains tax has narrowed significantly since the Finance Act 2024 reforms covered in tackl.finance’s tax series, now mainly relevant to the pre-July-2024 property grandfathering choice), inflation-indexed bonds, and everyday examples like rent escalation clauses and the “lifestyle creep” that can make a nominal salary increase feel like progress without representing any real one.