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 under Section 194I must be deducted if rent exceeds INR 50,000 per month or part of a month: 10% for land, buildings and furniture, and 2% for plant and machinery.
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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, buildings (including a factory building) and furniture or fittings, and 2% on plant and machinery, once rent exceeds INR 50,000 per month or part of a month (raised from INR 2,40,000 a year with effect from 1 April 2025).
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
- Maintenance and common area charges that the lease requires the tenant to pay
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
- Rent paid in cash above INR 10,000 a day to one person, which is disallowed under Section 40A(3)
Good to know
Pro tip: Always deduct TDS under Section 194I once monthly rent exceeds INR 50,000. 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.
Important: Which Act applies depends on the year. Income earned up to 31 March 2026 (FY2025-26, assessed in AY2026-27) is governed by the Income Tax Act, 1961. From 1 April 2026 the Income-tax Act, 2025 applies for tax year 2026-27, and its section numbers differ from the 1961 Act cited here. The TDS sections 192 to 194T are consolidated into sections 392 and 393, and the TDS rates and thresholds were retained. Pay the TDS by the 7th of the following month and file the quarterly TDS return in Form 26Q, then issue Form 16A to the landlord. Keep the rent receipts and the GST invoice, and claim input tax credit on the GST charged by a registered landlord.
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