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Querist : Anonymous

Querist : Anonymous (Querist)

05 July 2012 Dear experts,

Can a person working from home can claim electricity and rent as business expenses?

CA Siddhartha Bhardwaj

CA Siddhartha Bhardwaj (Expert)
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05 July 2012 Since the house is being used for personal as well as business purpose, only proportionate expense will be allowed.

Querist : Anonymous

Querist : Anonymous (Querist)

06 July 2012 Thanks,can you quote a case law or sections of the ACT where it is specified that such expenses can be claimed?

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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03 August 2025 Yes, a person **working from home** can claim **electricity and rent** as **business expenses** under the **Income Tax Act**, but **only the proportionate part** used for business purposes is **allowed as deduction**.

Let’s look at the **legal basis, relevant sections**, and **case laws**.

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### ✅ 1. **Relevant Sections under the Income Tax Act, 1961**

#### 🔹 **Section 37(1)** – *General deduction for business expenditure*

> "Any expenditure (not being capital or personal in nature), laid out wholly and exclusively for the purpose of business or profession shall be allowed."

* So, if **part of your home** (e.g., a room) is used for **business purposes**, and rent/electricity is paid, the **proportionate share** qualifies under this section.
* The **burden of proof** is on the taxpayer to demonstrate:

* The **extent of business use**, and
* That the expenses were **incurred wholly and exclusively** for the business.

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### ✅ 2. **Treatment in Practice (Income Tax Department view)**

* There is **no specific bar** in the Act against using home for business and claiming proportionate rent/electricity.
* However, personal-use portion **must be excluded**.
* Good practice: Maintain **separate meter (if possible)** or written calculation showing basis of apportionment (e.g., room size, usage hours).

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### ✅ 3. **Key Case Law Supporting This:**

#### 🧑‍⚖️ **CIT v. Dr. P.K. Sharma (2005) 276 ITR 83 (All.)**

* **Held**: Part of the house used for professional purpose (doctor’s clinic at home) — **proportionate expenses allowed**.
* The court **allowed electricity, depreciation, rent** on the portion used for profession.

#### 🧑‍⚖️ **CIT v. Gopal Ramnarayan Kasat (1989) 180 ITR 39 (Bom)**

* The assessee **used part of residence for business** — court held **proportionate deduction is permissible** under Section 37.

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### ✅ 4. **How to Claim It (Documentation Tip):**

| Expense | Claim Basis |
| ----------- | --------------------------------------------------------- |
| Rent | % of floor area used for business OR no. of hours per day |
| Electricity | % based on separate meter (if available) or usage pattern |
| Maintenance | Only that portion related to business area |

Also, retain:

* Rent agreement
* Electricity bills
* Calculation sheet for apportionment
* Any photos or layout showing business space

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### ⚠️ Important:

* Claim **only the justified business-use portion**.
* Avoid claiming 100% if the house is used partly for personal use — it may attract **disallowance during assessment**.

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### ✅ Conclusion:

Yes, **electricity and rent are allowable under Section 37(1)** on **proportionate basis** for home-based business, as confirmed by several judgments.

Let me know if you want:

* A **sample apportionment working**
* **Draft notes** for your tax file to justify such claims

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