Chapter IV - Computation of Total Income
Section 28
Section 28: rent, rates, taxes, repairs and insurance
Section 28 allows a business or profession to deduct the routine running costs of the premises and equipment it uses - insurance, local taxes, rent (if it's a tenant), and current repairs - while computing business/professional income, with the deduction proportionately restricted where the asset isn't used wholly for the business.
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Need advice on Section 28?
This article is for general information. Refer to the Income-tax Act, 2025 as amended by the Finance Act, 2026 and the Taxation and Other Laws (Amendment) Act, 2026 for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
(1) The following amounts shall be allowed as deduction in respect of premises, machinery, plant or furniture used for the purposes of the business or profession:— (a) any premium paid in respect of insurance against risk of damage or destruction thereof; (b) land revenue, local rates or municipal taxes paid; (c) rent paid, when the premises are occupied by the assessee as a tenant; (d) amount paid on account of current repairs to the premises, not being in the nature of capital expenditure, when the premises are occupied by the assessee otherwise than as a tenant; (e) amount paid on account of cost of repairs, not being in the nature of capital expenditure, when the premises are occupied by the assessee as a tenant and where he has undertaken to bear the cost of repairs to the premises; and (f) the amount paid on account of current repairs to machinery, plant or furniture, not being in the nature of capital expenditure.
(2) In case where the premises, building, machinery, plant or furniture is partly used or not wholly and exclusively used for the purposes of the business or profession, the deduction allowable under sub-section (1) shall be restricted to the fair proportionate part thereof as determined by the Assessing Officer, having regard to the usage for the purposes of the business or profession.
Introduction
Section 28 permits only the listed rent, insurance, tax and repair costs for business-use premises and assets. Occupancy as owner or tenant changes which repair clause applies, and mixed use requires allocation.
Key takeaways
Running costs of business assets
The section allows specified insurance, taxes, rent and current repairs for premises, machinery, plant or furniture used in business or profession.
Partial business use
When an asset is only partly used for business or profession, the deduction is restricted to a fair proportion reflecting that use.
What is deductible
In respect of premises, machinery, plant or furniture used for the business or profession, the following are deductible (section 28(1)):
- Insurance premium against risk of damage or destruction of the premises/machinery/plant/furniture
- Land revenue, local rates or municipal taxes paid
- Rent paid, where the premises are occupied by the assessee as a tenant
- Cost of current repairs to the premises (not capital in nature), where the assessee occupies them otherwise than as a tenant
- Cost of repairs to the premises (not capital in nature), where the assessee occupies them as a tenant and has undertaken to bear repair costs
- Cost of current repairs to machinery, plant or furniture (not capital in nature)
Proportionate restriction for partial business use
Where the premises, building, machinery, plant or furniture is only partly used, or not wholly and exclusively used, for the business or profession, the deduction is restricted to the fair proportionate part as determined by the Assessing Officer, having regard to the extent of business use (section 28(2)).
Business-use allocation
Separate business use from private or other use for each premises, building, machine, plant or furniture item.
Where use is not wholly for the business or profession, subsection (2) restricts the deduction to a fair proportion determined with regard to business use.
Step-by-step flow for applying Section 28
- 1
Is the premises, machinery, plant or furniture used for the business or profession?
- No: No deduction under Section 28.
- Yes: Go to the next step.
- 2
What kind of expense is it?
Section 28(1) covers insurance premium against damage or destruction, land revenue, local rates or municipal taxes, rent paid as a tenant, current repairs to premises (owner-occupied), repairs borne by a tenant who has undertaken to bear them, and current repairs to machinery, plant or furniture.
- 3
Is any repair expense capital in nature?
- Yes: Not deductible under Section 28; consider capitalisation and depreciation under Section 33.
- No: Go to the next step.
- 4
Is the asset used wholly and exclusively for business?
- Yes: Claim the full eligible amount.
- Partly: Under Section 28(2), the deduction is restricted to the fair proportionate part determined by the Assessing Officer having regard to business usage.
Practical checklist
Do
- Record whether premises are occupied as tenant or owner and who bears repairs under the agreement.
- Keep invoices, tax receipts, insurance schedules and a reasonable mixed-use allocation.
Avoid
- Do not treat capital improvements as current repairs under this section.
- Do not claim the full cost of an asset used partly outside business.
Illustrative example
Worked example: a shop-cum-residence
Hypothetical facts (illustration only, not a real taxpayer): Mr. Khan rents a two-floor building for ₹40,000 a month. The ground floor is his shop and the first floor is his family residence. He also pays for repainting the shop and a minor repair to the shop's display counter.
Rent as tenant
Rent paid for premises occupied as a tenant falls in Section 28(1)(c).
Partial business use
Because the building is only partly used for business, Section 28(2) restricts the deduction to a fair proportionate part. If floor area is the fair basis, about half the rent relates to the shop.
Repairs
Repainting the shop is a tenant repair claimable under clause (e) only if he has undertaken to bear repair costs; the counter repair is a current repair to furniture under clause (f), provided neither is capital in nature.
Outcome
- The shop's share of rent and the eligible repairs are deductible; the residential share is not.
- Keep the rent agreement and a usage note showing how the proportion was worked out, since the Assessing Officer determines the fair proportion.
Glossary
- Current repairs
- Non-capital work maintaining an existing asset, distinguished here from capital expenditure.
- Fair proportionate part
- The business-use share of an otherwise allowable mixed-use cost under subsection (2).
Frequently asked questions
Can I deduct rent I pay for my office or shop?
Yes - if you occupy the premises as a tenant, the rent paid is deductible under Section 28(1)(c).
Are capital repairs (like a major renovation) deductible under this section?
No - only current repairs, not capital expenditure, are deductible under this section.
What if I use part of my house for business and part for personal living?
The deduction is restricted to a fair proportion attributable to business use, as determined by the Assessing Officer, under Section 28(2).
Need help applying this provision to your situation?
Talk to our tax team about this sectionLast updated 10 October 2026