Income Tax - Business or Profession
Sections 29 and 30 of the Income Tax Act: Business Income, Rent, Repairs and Insurance
Sections 29 and 30 of the Income-tax Act, 1961 dealt with the manner of computing income from business or profession and deductions for rent, rates, taxes, repairs and insurance of business premises. From 1 April 2026, the Income-tax Act, 2025 is the current statute, so this page explains both the legacy provisions and their present counterparts.
Current position under the Income-tax Act, 2025
The Income-tax Act, 2025 came into force on 1 April 2026. For current-law reading, the subject formerly covered by Sections 29 and 30 of the 1961 Act should therefore be read primarily with Sections 27 and 28 of the 2025 Act.
Section 27 - Manner of computing profits and gains of business or profession
Section 27 states that income falling under the head "Profits and gains of business or profession" is computed under the applicable provisions in Sections 28 to 60, subject to the statutory exception stated in that section.
Section 28 - Rent, rates, taxes, repairs and insurance
For assets used for business or profession, Section 28 allows specified deductions that include:
- insurance premium against the risk of damage or destruction;
- land revenue, local rates or municipal taxes paid;
- rent paid where the assessee occupies the premises as a tenant;
- current repairs to premises occupied otherwise than as a tenant, provided the expenditure is not capital in nature;
- repair costs borne by a tenant where the tenant has undertaken to bear those costs, again excluding capital expenditure; and
- current repairs to machinery, plant or furniture, subject to the statutory conditions.
Where an asset is only partly used, or is not used wholly and exclusively, for business or profession, the Act restricts the deduction to the fair proportionate business-use part as determined under the provision.
Official reference: Income Tax Department - Income-tax Act, 2025.
Legacy Section 29 of the Income-tax Act, 1961
Section 29 was the gateway computation provision for income chargeable as profits and gains of business or profession under Section 28 of the 1961 Act. It required that such income be computed in accordance with Sections 30 to 43D.
In simple terms, Section 29 did not itself create a particular expense deduction. It directed the taxpayer to the detailed computation and deduction provisions that followed it.
Legacy Section 30 of the Income-tax Act, 1961
Section 30 allowed deductions for specified expenditure relating to premises used for business or profession. Its treatment depended partly on whether the assessee occupied the premises as a tenant or otherwise than as a tenant.
Where the assessee was a tenant
Rent paid for the business premises was deductible. If the tenant had undertaken the responsibility for repairs, the amount actually paid for those repairs could also qualify, subject to the rule excluding capital expenditure.
Where the assessee was not a tenant
The amount paid for current repairs to premises used for the business or profession could qualify for deduction. The provision did not permit capital expenditure to be treated as current repairs.
Rates, taxes and insurance
The section also covered sums paid for land revenue, local rates or municipal taxes and premiums paid to insure the premises against the risk of damage or destruction.
What these deductions mean in practical terms
The central requirement is business or professional use. A payment does not become deductible merely because it relates to a building. The premises must be used for the purposes of the business or profession, and the expense must fall within the relevant statutory category and conditions.
Rent is generally relevant where the assessee is a tenant. Repair expenditure requires closer attention to the nature of the work and the assessee's responsibility for bearing it. Municipal taxes, local rates and land revenue are separately recognised categories, while insurance concerns protection against damage or destruction of the relevant business asset.
Capital expenditure is not a current-repair deduction
A key distinction is between current repairs and capital expenditure. The legacy Section 30 expressly excluded capital expenditure from qualifying repair costs. The current Section 28 of the Income-tax Act, 2025 likewise states the non-capital condition for the relevant repair deductions.
Routine expenditure that preserves or maintains an existing business asset may fall within the repair provision, while expenditure that is capital in nature must be considered under the provisions applicable to capital assets rather than being claimed merely as current repairs.
Premises not used wholly for business
Under the earlier 1961 Act, Section 38 restricted deductions where a building or other asset was not used exclusively for business or profession. Under the 2025 Act, the proportionate-use rule is incorporated into Section 28 for the assets and deductions covered by that provision.
Therefore, where premises have both business and non-business use, the full expenditure should not automatically be treated as a business deduction. The allowable amount is governed by the statutory business-use restriction.
Related Income Tax provisions
For the sequence of provisions under the earlier Income-tax Act, 1961, see Section 28 - Profits and gains of business or profession, Section 31 - Repairs and insurance of machinery, plant and furniture, and Section 32 - Depreciation.
This article is intended as a general statutory guide. For a particular assessment year or transition issue, the applicable Act, Finance Act amendments, rules, notifications and relevant judicial decisions should be checked.