What is the difference between cost of acquisition and cost of improvement?

Cost of acquisition is the purchase price plus buying expenses (brokerage, stamp duty). For inherited or gifted assets it is the previous owner's cost. Cost of improvement is later capital expenditure that enhances the asset (a new floor, major renovation) on or after 1 April 2001 — not routine repairs.

A stock split turned 1 share into 2 — how does that affect cost?

A split does not change your total cost; it spreads it over more shares. 100 shares bought at ₹1,000 become 200 shares at ₹500 each, total cost unchanged. The holding period runs from the original purchase date, not the split date. Bonus shares, by contrast, have nil cost.

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Income Tax · Capital gains · Cost

Cost of acquisition, cost of improvement, and stock splits/bonus

✍️ Answered by EaseValue Advisors · Updated 17 Jul 2026 · 4-min read

Quick answer

Cost of acquisition is what you paid to buy the asset (plus buying costs); cost of improvement is later capital spend that enhances it (not repairs). A stock split keeps your total cost the same but spreads it over more shares; bonus shares have nil cost.

Cost of acquisition

The purchase price plus expenses to acquire — brokerage, stamp duty, registration.
Inherited or gifted asset: the cost is the previous owner's cost, and their holding period counts too.

Cost of improvement

Capital expenditure that enhances the asset — an extra floor, major renovation, boundary wall.
Not routine repairs and maintenance (those aren't added to cost).
Only improvements on/after 1 April 2001 are counted.

Stock split

A split doesn't change your total cost — it spreads it over more shares. Example: 100 shares bought at ₹1,000 (total ₹1,00,000); a 1→2 split gives 200 shares at ₹500 each — total cost still ₹1,00,000. Your holding period runs from the original purchase, not the split date.

Bonus shares

Bonus shares have a cost of acquisition of nil; their holding period starts from the date of allotment. (The original shares keep their own cost.)

Rates once you have the gain: short-term vs long-term.

General information based on the Income-tax Act as it stands, not advice on your specific case. Tax outcomes depend on your exact facts and residential status. © EaseValue Advisors LLP.

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