An owner cannot claim notional rent for using his own building.
### Other Expenses (Insurance, Repairs, Rates & Taxes)
Allowed to both owner and tenant alike.
### Capital Repairs by Tenant
Treated as Deemed Building in the tenant's hands.
Depreciation can be claimed by the tenant on such capitalised repairs.
### Section 37 Backstop
If as per the rent agreement the tenant has no obligation to incur revenue repairs, but he voluntarily incurs them for efficient business operations, the expense is allowed under Section 37 (residual section).
### Rent Paid by Firm to Partner
Allowed if reasonable.
Excessive portion is disallowed under Section 40A(2).
Worked example
### Example 1
Example: Mr. X, a tenant, spends ₹2,00,000 on renovation (capital repairs) of the rented building used for business.
Treatment: Not deductible under Section 30. Instead, treated as a deemed building in Mr. X's hands, and he can claim depreciation @ 10% on it.
### Example 2
Example: ABC Ltd. owns a factory building. It pays ₹50,000 as property tax and ₹1,00,000 as building insurance.
Treatment: Both fully deductible under Section 30 (rates & taxes and insurance), even though the company is the owner.
⚠️ Common exam mistakes
Claiming notional rent as a deduction when the owner uses the building himself — not allowed.
Treating capital repairs as revenue expense and claiming full deduction — they are capitalised.
Forgetting that Section 31 does NOT cover 'rates & taxes' on plant/machinery/furniture (only Section 30 mentions rates & taxes for building).
Missing the Section 37 fallback for voluntary revenue repairs by a tenant.
Bare-Act text Sections 30 and 31 · Income-tax Act, 1961 · click to expand
Section 30: In respect of rent, rates, taxes, repairs and insurance for premises, used for the purposes of the business or profession, the following deductions shall be allowed — (a) where the premises are occupied as a tenant, the rent paid for such premises; and further if he has undertaken to bear the cost of repairs to the premises, the amount paid on account of such repairs; (b) where the premises are occupied otherwise than as a tenant, the amount paid by him on account of current repairs; (c) any sums paid on account of land revenue, local rates or municipal taxes; (d) the amount of any premium paid in respect of insurance. Section 31: In respect of repairs and insurance of machinery, plant or furniture used for purposes of business — (i) amount paid on account of current repairs; (ii) premium paid for insurance against risk of damage or destruction.