<p>This investigation deals with a N-modules software reliability growth model (SRGM) wherein each module attains multiple types of faults of different severity levels. During the debugging phase, there may arise some new faults due to assumption of imperfect debugging. The reliability growth during the software testing phase governed by a non-homogeneous Poisson Process (NHPP). The proposed study is devoted to analyze the fault debugging phenomenon in all modules of software and to obtain expected number of faults observed, isolated and removed. The software reliability and optimum total cost of the software development during the testing phase are evaluated. The causes of fault occurrences in each module are different. The faults may occur with different failure rates and follow the nonlinear behavior with respect to the testing time. The NHPP model incorporates the testing-effort expenditure required for the faults debugging activities and governed by Weibull and logistic distributions which influence considerably not only the fault observation rate but also the time to isolate the faults and the time to remove the faults from all N-modules. In addition to predict the reliability of N-modular software, this study proposes optimal release policies for the SRGM by minimizing the expected cost subject to budget and testing-effort constraints, while ensuring a prescribed level of reliability and incorporating the effects of testing effort and efficiency. Some specific models are also deduced by setting the appropriate parameters so as to match with the existing models in the literature. Sensitivity results are presented through a numerical experiment to demonstrate the validity of the analytical formulations and the computational tractability of the model. An evolutionary algorithm, namely Particle Swarm Optimization (PSO) based on a dynamic penalty method, is employed to determine the optimal release time.</p>