In your example, you have made payments to a contractor for his services, i.e. extension work of your house.
This is what you are doing. You are preparing an expense voucher for recording payments made to contractors.
You have made this payment in respect of extensions made to the house.
This payment should inflate the cost of acquisition of the house, and thus should reduce the capital gains tax liability that arises when you sell the property.
Consider the following points.
1. Name of the firm shall be the name of the contractor in his individual capacity or the name of his firm.
2. Debit Construction expenses (or you can name a suitable account) with Rs. 7000.
3. Credit Cash/Bank account with Rs. 7000.
Note: You need to affix a revenue stamp of Re.1 on vouchers where cash payment exceeds Rs 5000. No need of such stamp in bank payments, NEFT and cheque
4. Make the contractor sign the receiver's signature field.
5. You can sign the signature field.
6. Since the house belongs to you (hopefully), there is no need to get the voucher approved. You are not going to cheat yourself, are you?
You should keep this voucher safe. Later, when you sell the property, you can use this voucher to inflate the cost of acquisition. And it will reduce your capital gains and the capital gains tax correspondingly.
