what is indexed cost of acquisition

Indexed cost of acquisition means an amount which bears to the cost of acquisition, the same proportion as Cost inflation index for the year in which the asset is transferred bears to the Cost inflation index for the first year in which the asset was held by the assessee or for the year beginning on 1st April, 1981, whichever is later.

How to compute indexed cost of acquisition

For assets acquired before 1/4/1981

For assets acquired after 1/4/1981

Here, cost means cost of acquisition or fair market value of the asset as on 1/4/1981, whichever is higher