Tag: Tax Planning

Section 28 of the Income-tax Act, 2025 permits deduction of specified expenses relating to premises, machinery, plant, or furniture used for business or profession. These include insurance premium, rent, local taxes, and current repairs, provided they are revenue in nature and not capital expenditure. Where an asset is only partly used for business, the deduction is proportionately restricted based on actual business usage, as determined by the Assessing Officer.

1. Rent, Rates, Taxes, Repairs and Insurance for Building [Sec. 28(1)(a)-(e)]

Under Section 28(1), deduction is allowed for expenses relating to premises used for business or profession. This covers insurance premium paid against risk of damage or destruction [clause (a)], land revenue, local rates or municipal taxes paid [clause (b)], and rent paid where the assessee occupies the premises as a tenant [clause (c)]. Further, current repairs to the premises are deductible — where the assessee is not a tenant, under clause (d); and where the assessee is a tenant who has contractually undertaken the cost of repairs, under clause (e). All such expenditure must be revenue, not capital, in nature.

2. Repairs and Insurance of Machinery, Plant and Furniture [Sec. 28(1)(f) r/w (a)]

Section 28(1)(f) allows deduction for amounts paid towards current repairs to machinery, plant, or furniture, provided such expenditure is not capital in nature — for instance, ordinary maintenance restoring the asset’s existing condition rather than creating a new advantage or asset. Additionally, insurance premium paid against risk of damage or destruction of machinery, plant, or furniture is deductible under clause (a), applied jointly with premises. Where such assets are only partly used for business purposes, Section 28(2) restricts the deduction to the fair proportionate part attributable to business use, as assessed by the Assessing Officer.