Can I Claim Office Rent as a Business Expense in India?
Yes — rent paid for business premises (office, factory, warehouse) is fully deductible against corporate income tax under Section 37(1) of the Income Tax Act 1961, provided it is incurred wholly and exclusively for business purposes. TDS at 10% under Section 194I must be deducted if annual rent exceeds INR 2,40,000.
What Income Tax Department (CBDT) says
Section 37(1) IT Act 1961: any revenue expenditure not covered by Sections 30-36 but incurred wholly and exclusively for business or profession is deductible. Section 30 specifically allows deduction for rent paid for premises used for business. TDS: Section 194I requires 10% TDS on rent for land/building exceeding INR 2,40,000/year.
When you can claim
- Rent for registered office, branch office, or factory premises
- Co-working space memberships used exclusively for business
- Security deposit amortised over lease term (if non-refundable)
- Lease registration charges and stamp duty (revenue portion)
- Rental for storage warehouses and godowns used in business
When you cannot claim
- Rent for residential premises used personally (no home-office deduction for companies)
- Security deposits (capital nature — not deductible until forfeited)
- Rent for capital improvements treated as capital expenditure
Good to know
Pro tip: Always deduct TDS at 10% under Section 194I if annual rent exceeds INR 2,40,000. Failure to deduct disallows 30% of the rent expense in your tax computation under Section 40(a)(ia). Get a registered lease agreement to substantiate the deduction. For GST-registered landlords, claim input tax credit on the 18% GST charged on commercial rent.
Related expenses
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