In the present study, the role of polymeric surfactant polyvinylpyrrolidone (PVP) in enhancing optical absorption of PVP capped TiO2 nanoparticles in the visible region is investigated. When the PVP capped hydrous amorphous TiO2 is calcined at temperature less than thermal degradation temperature of PVP, the polymeric surfactant alters the band structure of TiO2 nanoparticles resulting a significant change in optical absorption by introducing Ti3+ ions and oxygen vacancies in the band gap. The induced surface modifications of TiO2 nanoparticles by PVP were studied using micro Raman, XPS, UV-Vis., EPR and photoluminescence spectroscopy. The Raman active mode at 144 cm(-1) which is ascribed to anatase TiO2 is shifted and broadened in PVP capped samples (TP1) due to oxygen related stoichiometry defects. The excess oxygen vacancies in TiO2 lattice leads to the formation of Ti3+ ions to maintain the electrostatic balance. The existence of Ti3+ ions is also confirmed from EPR spectra. The observed red shift of optical absorption spectra is due to reduction in the band gap of PVP capped nanoparticles. Furthermore the deconvoluted Ti2p(3/2) and T12p(1/2) XPS peaks shows prominent shoulder peaks at 457.7 and 463.5 eV corresponding to Ti3+. The formation of Ti3+ upper shifts the O1s line of TP1 due to transfer of charges from oxygen atoms of PVP to Ti4+ ions. Besides PL emission at 481 nm confirms the formation of Ti3+ due to surface oxygen vacancies induced by PVP. The surface defects Ti3+ and oxygen vacancies act as trap centers and extend the lifetime of charge carriers.