India, Aug. 11 -- In 2023, Neha Mehta sold her 1,020 sq ft flat in Pune's Kothrud for Rs.78 lakh. Two years earlier, she had invested Rs.6.5 lakh in major renovations, installing a modular kitchen, replacing old tiles with vitrified flooring, enclosing the balcony with sliding glass doors, and upgrading the plumbing and wiring to modern standards.

When calculating her capital gains tax, she included these expenses to her cost of acquisition as 'cost of improvement.' She kept detailed, itemised GST-compliant invoices and made all payments via bank transfer. The Income Tax Department flagged her return for review due to the sizable deduction, but the claim was accepted in full. Neha's case shows that well-documented, value-enhancing renova...