For the Einbürgerung we have to first give our Indian passport to Germany Authority and then only we get the Einbürgerungs Urkunde.

Now as far as i know in US and UK we have to personally get our Indian passport cancelled and get a surrender certificate from Indian Embassya so we can always keep our old Indian passport with us.

Now how does it work in Germany when we submit our Indian pass with Germany Authority.Will later the Indian Authority send us the cancelled passport back or we will never get it back for any future reference?

No. Nothing like this happens. Hence, it is advisable to make a copy of each page of the passport before submission to German Authorities.

Alternatively, one can go to the Embassy/ Consulate, surrender the citizenship, get a surrender certificate, get back the cancelled passports and then handover this document or so to German Authorities. I am however, not very sure how it works and needs to be clarified with all concerned. 

Thank you swisshansa10 for your inputs.

I also find its strange that in every other country one gets the Indian cancelled passport back whereas here what i came to know it the German authority takes it and submits it to Indian authority.Now the question is why the Indian authority does not give the cancelled pass back.

Also why not German authority not issuing some kind of letter which can be shown to the Indian embassy to make them sure we get German citizenship so need to cancel the pass and get a Surrender certificate and this certificate should be accepted by German authority for issuing the Einbürgerung.