Indexed cost of acquisition must use the inflation index from the year the asset was first held, affecting capital gains computation. Indexed cost of acquisition is determined by applying the Cost Inflation Index to the cost of acquisition, using the CII for the year of transfer relative to the CII for the first year the asset was held by the assessee or the specified later base year. For assets acquired by gift, the indexed cost must be computed with reference to the year the previous owner first held the asset, not the year the recipient became owner.