Capital gains - what is included in the cost of improvement

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kalyanaraman (Querist)
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03 November 2011 In computation of Capital Gains in selling a house, I understand that the Indexed Cost of Improvement can be set off against the Sale Consideration. My questions are:

1. What are costs of improvement that can be included?
2. Does each cost have to be indexed from the year of incidence?
3. Do we need to have documentary proof for every expense? Question arises as the flat is 25 years old !!
4. will maintenance charges paid to the association be eligible for deduction?

Thanks a lot for your assistance,

Regards
Kalyanaraman S.

Yash Anandkumar Mandavia

Yash Anandkumar Mandavia (Expert)
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03 November 2011 1. Any expenditure that is CAPITAL in nature incurred in relation to the house ur selling is included in cost of improvement.

2. The indexation is available according to the year in which the improvement costs were incurred.

3. As far as records are concerned, it is said that even A Rs. 100 petrol bill should be kept as documentary evidence. So, without documentary evidences, ITO can disallow the improvement costs leading to tax consequences with interest or may be penalty as well.

4. In my humble opinion, maintainance charges are revenue in nature and hence is not allowable as cost of improvement.