Your cost is land plus construction, taken separately
A self-built house has two cost layers, and both belong in the computation (Section 48). The first is the land: what you paid for the plot, from its purchase deed, or, if the plot was bought before 1 April 2001, its fair-market value as on that date under Section 55(2)(b), capped at the stamp-duty value of the date. The second is the construction: everything spent turning the plot into a house.
The construction cost is the part that usually has no clean record, because it was paid out over time to a contractor, masons and suppliers rather than in a single transaction with a deed. But it is a real cost and, properly reconstructed, it is fully deductible against the sale price, so establishing it is where most of the tax saving on a self-built house sits.
Reconstructing the construction cost without the bills
A registered valuer reconstructs the construction cost year by year. Working from the approved building plan and the built-up area, the valuer applies the accepted construction rate per square foot for the years the house was actually built, which gives a defensible cost for the structure even when the individual bills are long gone.
That estimate is strengthened by whatever independent records exist: the building-plan approval and completion certificate from the municipality or panchayat, the property-tax assessment that began once the house was occupied, home-construction loan sanctions and disbursements on the bank statement, and any material or contractor part-bills that survived. The more the valuer's figure is tied to these, the harder it is for the assessing officer to reduce it, and the officer can refer a value that looks high to a Valuation Officer under Section 55A, so the estimate should be realistic.
Holding period, and the NRI rate on the whole house
For capital gains the house is treated as one asset when it is sold, and if it has been held for more than twenty-four months the gain is long-term (Section 2(42A)). A house built years ago and sold now is comfortably long-term, so the whole gain, on land and building together, is long-term.
For an NRI that long-term gain is taxed at a flat 12.5% with no indexation for a sale on or after 23 July 2024 (Section 112), and the resident-only option of 20% with indexation does not apply. Because the rate is flat, the lever that reduces the tax is the cost itself, which is exactly why the land value and a well-supported construction estimate are worth getting right rather than understating for want of paperwork.