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Microlesson · 5-min read

Deduction for Building Expenses [Section 30] & Apportionment [Sec 38(1)]

# Deduction for Building/Premises Expenses [Section 30]

Section 30 allows deductions for rent, repairs, taxes and insurance of premises used for business/profession. Computation of profits is governed by Sections 30 to 43D [Sec 29].

## If Building is Occupied as a TENANT

  • Rent paid is allowed.
  • Cost of actual repairs borne by the tenant/lessee.
  • Property taxes (subject to Sec 43B — actual payment), insurance, and other premises-related expenses are deductible.

## If Building is OWNED by the Assessee

  • No deduction for notional rent (no opportunity cost is allowed).
  • A firm renting premises from a partner can claim the rent if reasonable and not excessive.
  • Repairs incurred by the owner are allowed.
  • Property taxes (subject to Sec 43B), insurance and other premises expenses are deductible.

## Capital-Nature Expenses

  • Repairs of a capital nature (by owner or tenant) are NOT deductible.
  • They are added to the block of assets as additions, and depreciation can be claimed.

## Premises Used Partly for Business [Sec 38(1)]

  • Only the business-attributable share of expenses is deductible.
  • If the property is partly used for business, the actual repairs proportionate to business can be claimed.

> Key contrast: Under House Property the repair deduction is a flat 30% of NAV; under PGBP it is actual expenses (apportioned to business use).

Worked example

### Example 1

Example (Capital vs revenue repair): A business owner spends ₹40,000 whitewashing/minor repairs and ₹5,00,000 constructing an additional floor.

  • ₹40,000 (current/revenue repairs) → deductible under Sec 30.
  • ₹5,00,000 (capital nature) → NOT deductible; added to the block of assets, and depreciation claimed.

### Example 2

Example (Partial business use): A building's total repairs are ₹1,00,000; 60% of the building is used for business and 40% for residence.

  • Deductible under PGBP = 60% × ₹1,00,000 = ₹60,000 (business share only, per Sec 38(1)).

⚠️ Common exam mistakes

  • Claiming notional rent on an owner-occupied business premises — no notional/opportunity-cost rent is allowed.
  • Deducting capital-nature repairs under Sec 30 — they must be capitalized to the block of assets and only depreciation claimed.
  • Applying the flat 30% house-property repair deduction to business premises — under PGBP only actual expenses are allowed.
  • Claiming property taxes on accrual without payment — they are subject to Sec 43B (actual payment basis).
  • Deducting 100% of expenses where premises are partly personal — only the business-attributable share is allowed (Sec 38(1)).
Reference: Sections 30, 38(1) — Income-tax Act, 1961
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