How does the cost inflation index work for capital gains?

Government notifies a cost inflation index to give concession to taxpayer in calculation of long-term capital gains tax. This capital gains index helps you in enhancing your cost. For example, the base index is 100 and for the current year the index is 939. So in respect of your long-term capital liability, plus the amount which you need to invest for Section 54 etc. the amount of investment significantly comes down by applying this cost inflation index.