Planning to sell a property in India

Hello folks, 

After googling for an hour I am still not sure about the tax impact of selling a property in India. Then I found this forum. 
I know when it comes to tax, I should goto a tax professional. But just thought if any of you have any experience in this area. I will eventually goto a tax consultant when I will be able to sell the property. 

Here is my situation. 

I booked the property in December 2007. I took a loan on the property. For the first 16-17 months I was paying the PMI (I guess this is just the interest portion of the loan and no principal was getting deducted during that time). We got the key to the property in January 2009 (after it became ready to move-in and the registration). Now I am planning to sell this property in March 2011. 

The questions which I have are : 

1) In case I get a profit will that be considered as a short-term or long-term capital gain. It seems, to be considered for a long-term capital gain the property needs to be acquired for at least 3 years. Now in my case I got the key to the property in January 2009 (which would be less than 3 years if I sell the property now). But I booked the property and paying PMI/EMI since December 2007 (which would be more than 3 years if I sell the property now). Also, how will the capital gain be calculated ? Just (selling price - purchasing price) or (selling price - indexed purchasing price). 

Property would be considered deemed to be acquired when the possession is received i.e. jan-09. Hence it would be short term capital gain and no indexation benefits would be available.

2) Since I am based in US, and I don't earn any income from the property and I don't have any income in India, so I don't pay income taxes in India. I am sure if I sell the property with profit, then I have to pay some taxes. Can I deduct the property taxes I paid so far, PMI interest paid during the first 16-17 months of the bank loan, EMI interest paid so far from the capital gain ? Also can I deduct any improvement I have done on the property (like woodworks, modular kitchen, etc.) from the capital gain ? In case I can, do I need to produce the receipts of those improvements ? 

Property tax and interest on locan can be claimed deduction against the Rental Income and not against the capital gain.

The additional cost incurred in the property would be added in the cost of acquisition for deriving the capital gain.

Documents supporting the improvement expenses has to be maintained as they may be asked by the AO in case of scrutiny.

3) Somewhere I read that I can save long-term capital gain by investing in capital gain bonds that REC or NHB issues. Is there any restriction for a NRI to invest in those bonds ? Also In case this becomes a short-term capital gain, can I still use those bonds to save some taxes ? 

This benefit is not available for short term capital gain.

4) Is there any other ways to save taxes on short-term or long-term capital gains ? 

Thanks in advance, 

Ran