There can be two instances to understand tax implication, one wherein you put up in the house or the property is rented. Also there can be another side to the story in respect of the expenses you incur on the improvement of your home premises such that the later is just regular wear and tear maintenance or involves a lot of capital which can then amount to as a capital expense.
In a case when the property is rented and expenses are incurred towards regular maintenance
Then a flat deduction of 30% from the rental income is allowed every year which can be claimed irrespective of the expenses. Nonetheless, it is to be remembered if the property under study is occupied by you no deduction is allowed.
Home improvement cost on the other hand is not treated as regular maintenance cost and in a case when you yourself live in it, it provides you with an opportunity to reduce your capital gains by claiming such charges. To do it, you need to maintain all the receipts for the same. Thus it would reduce your capital gains tax implication at the time of sale. Indexation benefit is also available.
If you reside in this home for more than two years then a deduction in its respect as indexed cost of improvement will reduce your capital gains liability by the same amount.
Also, if loan is taken to fund the improvement cost then interest payment is also allowed to be claimed as deduction.u/s 24(b) of the Income-tax Act, 1961. In case of a self-occupied home, the limit is capped to the maximum of Rs. 30000 interest in a year.