Business Deduction for Rent, Rates, Repairs and Insurance Premium: Sections 28 and 30 of the Income Tax Act 2025
Section 28 of the Income Tax Act 2025 lets a business or profession deduct insurance on its premises, machinery, plant and furniture, land revenue and municipal taxes, rent paid as a tenant, and current (non-capital) repairs. Section 30 separately allows premium on insurance of stock or stores, cattle insurance by a federal milk co-operative society, and employer-paid health insurance for employees. If an asset is used only partly for business, only a fair proportion is allowed. Law below is as amended by the Finance Act, 2026 (tax year 2026-27).
Which expenses does section 28 allow?
Section 28(1) applies to premises, machinery, plant or furniture used for the purposes of the business or profession. Six items are allowed:
| Clause | Expense | Condition |
|---|---|---|
| 28(1)(a) | Insurance premium against damage or destruction | Of the premises, machinery, plant or furniture |
| 28(1)(b) | Land revenue, local rates, municipal taxes | Must be paid |
| 28(1)(c) | Rent | You occupy the premises as a tenant |
| 28(1)(d) | Current repairs to premises | You occupy otherwise than as a tenant; not capital expenditure |
| 28(1)(e) | Cost of repairs to premises | You occupy as a tenant and have undertaken to bear the repair cost; not capital expenditure |
| 28(1)(f) | Current repairs to machinery, plant, furniture | Not capital expenditure |
The word "paid" in clauses (b) and (c) and the phrase "not being in the nature of capital expenditure" in (d), (e) and (f) are the two tests that decide most claims.
Who can claim repairs: the tenant or the owner?
It depends on how you occupy the premises. An owner-occupier claims current repairs under clause (d). A tenant claims repairs under clause (e) only if the tenant has undertaken to bear that cost, typically in the lease. Repairs of machinery, plant and furniture under clause (f) do not depend on ownership of the premises.
What if the premises are only partly used for business?
Under section 28(2), where the premises, building, machinery, plant or furniture is partly used or not wholly and exclusively used for business, the deduction is restricted to the fair proportionate part, as determined by the Assessing Officer having regard to business use. The Act gives no fixed percentage, so keep a reasonable basis (floor area, hours of use) in your records.
What does section 30 add for insurance premium?
Section 30 allows these premiums in computing business or profession income under section 26:
- Section 30(a): premium paid by any assessee against damage or destruction of stocks or stores used for the business or profession.
- Section 30(b): premium paid by a federal milk co-operative society on insurance of the life of cattle owned by a member of a primary society that supplies milk to it.
- Section 30(c): premium paid by an employer, by any mode other than cash, for health insurance of its employees under a scheme framed by the General Insurance Corporation of India (approved by the Central Government) or by any other insurer and approved by the IRDAI.
So premium on a shop building or machine falls under section 28(1)(a), while premium on goods held for sale falls under section 30(a).
| What is insured | Section |
|---|---|
| Premises, machinery, plant, furniture | 28(1)(a) |
| Stocks or stores | 30(a) |
| Cattle (federal milk co-operative society) | 30(b) |
| Employees' health (non-cash mode) | 30(c) |
Worked example 1: a shop under a lease (tax year 2026-27)
Ravi runs a hardware shop in a rented premises that he uses entirely for business. Assumptions: he has undertaken in the lease to bear repair costs, and the repair is not capital in nature.
| Item | Working | Amount (Rs) | Provision |
|---|---|---|---|
| Rent | 25,000 x 12 | 3,00,000 | 28(1)(c) |
| Municipal tax paid | Paid in year | 9,000 | 28(1)(b) |
| Insurance on shelving and furniture | Premium paid | 6,000 | 28(1)(a) |
| Repainting and minor repairs | Tenant bears cost | 14,000 | 28(1)(e) |
| Insurance on stock | Premium paid | 30,000 | 30(a) |
| Total deduction | 300000 + 9000 + 6000 + 14000 + 30000 | 3,59,000 |
Worked example 2: a part-business flat (tax year 2026-27)
Meena, a consultant, works from a rented flat at Rs 36,000 a month. Assumptions: she uses 25% of it for her profession, a fair basis supported by floor area, and the Assessing Officer accepts it.
- Annual rent: 36,000 x 12 = Rs 4,32,000.
- Business share under section 28(2): 4,32,000 x 25% = Rs 1,08,000.
- Municipal tax paid Rs 8,000 x 25% = Rs 2,000.
- Insurance on her office computers, used wholly for the profession: Rs 5,000 in full under 28(1)(a).
- Total: 1,08,000 + 2,000 + 5,000 = Rs 1,15,000.
Real-life scenarios
Scenario 1. Sunil owns a small workshop and replaces worn belts and re-wires a panel. These are current repairs to premises and plant, so section 28(1)(d) and (f) apply. When he later builds an extra floor, that is capital in nature and is outside section 28.
Scenario 2. Anita rents a clinic. Her lease is silent on repairs and the landlord handles them, so she has no repair claim under clause (e). She can still claim the rent under clause (c).
Do these deductions apply under the safe harbour rules, and are keyman policy receipts taxable?
Two edge cases come up in practice. First, if an eligible assessee opts for the safe harbour under rule 101 (rule 100(2) covers selling raw diamonds and storage of components in a bonded warehouse), rule 100(3)(a) treats deductions under sections 28 to 34 as already given full effect, so no separate rent, repair or premium claim is allowed. Second, section 26 treats any sum received under a Keyman insurance policy, including bonus, as business income, so the premium deduction does not make the maturity or claim amount tax-free.
Common mistakes
- Claiming a new floor, renovation that adds an asset, or machinery replacement as a "repair". Capital items are excluded.
- Claiming tenant repairs under clause (e) without an obligation to bear them.
- Deducting 100% for a premises used partly for personal purposes, contrary to section 28(2).
- Putting stock insurance under section 28. It sits in section 30(a).
- Paying employee health insurance premium in cash and claiming it under section 30(c), which requires a non-cash mode.
- Claiming municipal tax that is only provided for and not paid.
Quick reference
| Question | Answer | Where |
|---|---|---|
| Capital repairs allowed? | No | 28(1)(d), (e), (f) |
| Partly used premises? | Fair proportion only | 28(2) |
| Stock insurance? | Allowed | 30(a) |
| Employee health premium paid in cash? | Not under 30(c) | 30(c) |
Where this is in the Act
- Section 28(1)(a) to (f): deductible rent, rates, taxes, repairs and insurance.
- Section 28(2): fair proportion for partial business use.
- Section 30(a), (b), (c): insurance of stock, cattle and employee health.
- Section 26: the head "Profits and gains of business or profession" for which section 30 allows the deduction.
For related reading, see business income and deductions under the 2025 Act and, if you pay rent and must deduct tax on it, TDS on rent under the Income Tax Act 2025.
For a CA firm, the hard part is collecting proof for each client's claims: rent receipts, premium receipts, municipal tax challans and a note on business-use share. Finexo's practice management software helps you track document requests and follow-ups across your client book. It does not decide what is allowable.
This article explains the Income Tax Act 2025 (as amended by the Finance Act, 2026). It is general information, not tax advice. Confirm the position for a specific case with a qualified chartered accountant.
Frequently Asked Questions
Is rent paid for business premises deductible under the Income Tax Act 2025?
Yes. Section 28(1)(c) allows rent paid when the assessee occupies the premises as a tenant and uses them for the business or profession.
Can I deduct repairs to rented business premises?
Only if you have undertaken to bear the cost of repairs and the repairs are not capital in nature (section 28(1)(e)). An owner-occupier claims current repairs under section 28(1)(d).
What if I use the premises partly for business?
Under section 28(2) the deduction is limited to the fair proportionate part, as determined by the Assessing Officer, having regard to business use.
Is insurance premium on stock deductible?
Yes. Section 30(a) allows premium paid by any assessee against damage or destruction of stocks or stores used for business or profession.
Is a keyman insurance payout taxable under the Income Tax Act 2025?
Section 26 lists any sum received under a Keyman insurance policy, including bonus allocated on it, as income chargeable under the head business or profession.
Is employee health insurance premium deductible for the employer?
Section 30(c) allows it if the employer pays through a mode other than cash, under a scheme framed by the General Insurance Corporation of India and approved by the Central Government, or by another insurer and approved by the IRDAI.