Capital gains - Cost of improvement

Dear Sir,

Hope you are doing well !!

Cost of improvement is the capital expenditure incurred by an assessee for making any addition or improvement in the capital asset. It also includes any expenditure incurred in protecting or curing the title. In other words, cost of improvement includes all those expenditures, which are incurred to increase the value of the capital asset. However, any expenditure which is deductible in computing the income under the heads Income from House Property, Profits and Gains from Business or Profession or Income from Other Sources (Interest on Securities) would not be taken as cost of improvement.

In your case, you can include expenses on the regularization of title, boundary wall, purchase of fire fighting equipment, plants purchase etc.

However, salaries paid to staff would not be treated as cost of improvements.

As per section 55 Cost of improvement means:

in relation to any other capital asset,—

[i] where the capital asset became the property of the previous owner or the assessee before the 1st day of April, 79[2001], means all expenditure of a capital nature incurred in making any additions or alterations to the capital asset on or after the said date by the previous owner or the assessee, and

[ii] in any other case, means all expenditure of a capital nature incurred in making any additions or alterations to the capital asset by the assessee after it became his property, and, where the capital asset became the property of the assessee by any of the modes specified in sub-section [1] of section 49, by the previous owner,

but does not include any expenditure which is deductible in computing the income chargeable under the head "Interest on securities", "Income from house property", "Profits and gains of business or profession", or "Income from other sources", and the expression "improvement" shall be construed accordingly.

Thus it only includes expenditure of capital nature so I think only the boundary wall expense will be considered and that too only if you have proper bill of same.

Hope you find the information helpful if you do please rate it 5 and provide your valuable feedback for my improvement.

Thank you

Hello,

Cost of improvement includes all capital expenditure that increases the value of the concerned property either by way of addition or improvement. It also includes expenditure for securing a better title of the property.

In your case, only expenses on the regularization of the title and for boundary wall will be considered as part of the cost of the improvement.

I hope that this answer satisfies your requirement.

Regards,

CA Hunny Badlani

Hi,

Any expense incurred for maintenance or upkeepment of land will not form part of improvement cost (such as salary to staff for upkeep)

However, exepnses incurred to improve the land can form part of cost of improvement such as building wall and regularising ttile

- In your case, cost of improvement would include expenditure incurred for maintenance of the land. Except fire fighting equipment and plants purchase, all expenses would be allowed.