New Delhi, July 29 -- When you sell a residential property, the profit earned-known as capital gains-is taxable. However, this tax can be significantly reduced by claiming allowable deductions such as the cost of improvement. While this term is widely used, not every property-related expense qualifies, tax experts caution.

This Mint story explains what expenses qualify as improvements, citing legal provisions and real-world examples.

Chartered Accountant Vijaykumar Puri clarified: "Cost of improvement is clearly defined in income tax law, specifically under Section 55. It refers to expenses of a capital nature related to additions or alterations to an asset. Not all expenses qualify as capital expenses."

Essentially, capital expenses a...