Cost of improvement, as the name suggest, does n't mean normal repairs.
Suppose one has purchased a house constructed upto Ground floor only on 1.12.2007 for Rs 500000. Price paid- will be cost of acquisition.
Now, the sidewalls which were of 5 feet hieght only, raised to 7 feet till 31.3.2008. Expenditure incurred 30000. It is the improvement cost.
Aftersometime, according to plan ans permission , he slowly starts to constructs First Floor. Upto 31.3.2010 he inccurs expenditure of Rs 40500/-. From 1.4.2010 to 28.06.2010 the work has been completed and further Rs. 80500/ has been spent. These costs will be added to the cost of the property as cost of improvement.
As on 1.03.2011 , suppose this entire house is sold. Indexation will be made in respect of Cost of acquisition as Cost of Improvement in the following manner , so as to arrive Total Indexed Cost of the property-
1. INDEXED COST OF ACQUISITION =(500000 x CIF 2010-11)/CIF 2007-08
2. INDEXED COST OF IMPROVEMENT =(30000 x CIF 2010-11)/CIF 2007-08+ (40500x CIF 2010-11)/CIF 2009-10+(80500 x CIF 2010-11)/CIF 2010-11.
3. TOTAL INDEXED COST =1+2
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