Claim cost of improvement in the assets to reduce taxes

Any expenditure of a capital nature incurred in making additions or alteration to the asset is to be added to the cost of acquisition by way of cost of improvement. The additions or alterations which enhance the utility and worth of the capital asset are of capital nature. The following expenditures are considered as forming cost of improvement –

  1. construction of boundary wall of an open plot of land or raising the boundary wall.
  2. construction on an existing plot of land or making additional construction or raising floors in a building.
  3. clearing of encumbrances on a property.
  4. getting property vacated from unauthorised occupiers.
  5. betterment charges paid to municipality under a Town Planning Scheme.

The expenditure which is deductible in computing taxable income under other heads of income cannot be added as cost of improvement. Also, in cases where the fair market value as on 1.04.1981 is adopted in lieu of the cost of acquisition, only the expenditure on improvements incurred on or after that date is to be considered. The assessee will be entitled to indexation of cost of improvement for the purpose of computing long term capital gains except in case of bonds and debentures. is here to solve all your tax worries, be it relating to Tax Returns, Tax Support or Tax Planning. Just contact us; we are here to relieve you from all your tax worries. provides most hassle free tax return filing/ online return filing experience. Once you have collected, your salary certificate and other documents, we request you to please log in to or you can also directly mail at to submit the details. Upon receiving the documents, we would contact you to file your return of income.

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