Sections 27 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Section 27 tells the reader which sections compute business income. Section 28 allows deductions for insurance, local taxes, rent and current repairs on premises, machinery, plant and furniture used in the business or profession. Section 30 allows deductions for certain insurance premiums. This article explains the three sections as per the Income-tax Act, 2025 (30 of 2025) as amended by the Finance Act, 2026.
The income of a business or profession charged under section 26 is computed as per sections 28 to 60, except section 58. Section 28 allows insurance premiums, land revenue, local rates and municipal taxes, rent paid as a tenant and current repairs, restricted to a fair proportion where the asset is only partly used for the business. Section 30 allows premiums for stock insurance, cattle insurance by a federal milk co-operative society, and non-cash health insurance for employees.
Where these sections sit
These sections belong to Part D of Chapter IV (business or profession). Section 26, the charging section for business income, is in our post on Section 26; section 29, on employee welfare deductions, is in our post on Section 29; section 31, on bad debts, is in our post on Section 31. Section 27 itself says section 58 stands apart: section 58 is the presumptive scheme and is covered by a separate live post. To keep the books that support each of these claims, our books of accounts compliance service is useful.
Section 27: how business income is computed
"The income referred to in section 26 shall be computed as per the provisions of sections 28 to 60, except section 58."
- The income referred to is the income of the business or profession chargeable under section 26.
- It is computed under sections 28 to 60, a continuous run of the Act that covers the deductions, disallowances and special computations for business income.
- Section 58 is excluded from that run. Section 58 is the presumptive taxation provision with its own live post, Section 58 on presumptive taxation.
Section 27 gives no rate and no amount; it only fixes which sections apply.
Section 28: rent, rates, taxes, repairs and insurance
Section 28(1): the deductions
The following amounts are allowed as deduction in respect of premises, machinery, plant or furniture used for the purposes of the business or profession:
| Clause | Deduction | Condition printed in the clause |
|---|---|---|
| (a) | Any premium paid for insurance against risk of damage or destruction of the premises, machinery, plant or furniture | None other than the use for the business |
| (b) | Land revenue, local rates or municipal taxes paid | None other than the use for the business |
| (c) | Rent paid | When the premises are occupied by the assessee as a tenant |
| (d) | Amount paid on account of current repairs to the premises, not being capital expenditure | When the premises are occupied by the assessee otherwise than as a tenant |
| (e) | Amount paid on account of the cost of repairs, not being capital expenditure | When the premises are occupied as a tenant and the assessee has undertaken to bear the cost of repairs to the premises |
| (f) | Amount paid on account of current repairs to machinery, plant or furniture, not being capital expenditure | None other than that it is not capital expenditure |
Notes on clause (e): it operates only where the tenant has undertaken to bear the repair cost, which is why it is separate from clause (d). In the copy of the text consulted, a stray full stop is printed on a line of its own between clauses (e) and (f); it is a printing mark, not part of the clause.
Section 28(2): partly used assets
Where the premises, building, machinery, plant or furniture is partly used or not wholly and exclusively used for the business or profession, the deduction under sub-section (1) is restricted to the fair proportionate part, as determined by the Assessing Officer, having regard to the usage for the business or profession. The Act gives no fixed ratio; the Assessing Officer decides on the facts.
Example: rented shop with part residential use
Neelam (invented) runs a tailoring business from a rented premises and also lives in a part of it. She pays rent of Rs. 1,20,000 in the tax year. Under section 28(1)(c) rent paid is allowed when the premises are occupied as a tenant, but under section 28(2) the deduction is limited to the fair proportionate part as determined by the Assessing Officer having regard to usage for the business. If the Assessing Officer, on the facts, finds that four-fifths of the premises are used for the business, the deduction would be 1,20,000 x 4/5 = Rs. 96,000. This is an illustration of the arithmetic only; the Act prescribes no ratio.
Example: current repairs on plant
Gopal (invented) pays for the current repair of a sewing machine used wholly in his workshop. Under section 28(1)(f) the amount is allowed because it is a current repair and not capital expenditure. If he instead paid to replace the machine, it would not be a current repair, and the capital treatment would be found in other provisions.
Section 30: deduction on certain premium
In computing income chargeable under section 26, the following premiums are allowed as deduction:
| Clause | Who pays | Premium for |
|---|---|---|
| (a) | Any assessee | Insurance against risk of damage or destruction of stocks or stores used for the business or profession |
| (b) | A federal milk co-operative society | Insurance on the life of the cattle owned by a member of a co-operative society, being a primary society engaged in supplying milk raised by its members to the federal milk co-operative society |
| (c) | The assessee as an employer | Insurance on the health of its employees, paid through any mode of payment other than cash, under a scheme framed by (i) the General Insurance Corporation of India formed under section 9 of the General Insurance Business (Nationalisation) Act, 1972 and approved by the Central Government, or (ii) any other insurer and approved by the Insurance Regulatory and Development Authority established under section 3(1) of the Insurance Regulatory and Development Authority Act, 1999 |
Two matters of reading. First, clause (a) covers stocks and stores, while section 28(1)(a) covers premises, machinery, plant and furniture; the two sections cover different assets. Second, clause (c) is conditioned on payment by a mode other than cash. The Acts named in clause (c) are separate laws; check them.
Example: employer health cover
Sai Components (an invented firm) pays the premium for a group health policy for its employees by bank transfer, under a scheme framed by an insurer and approved by the authority named in clause (c)(ii). The premium is allowed under section 30(c). Had it paid in cash, the condition "through any mode of payment other than cash" would not be met.
Need help with business deductions?
Rent, repairs and premiums are among the most common claims in a business return, and the proportion and the mode of payment are where claims fail. For help with books and a defensible return, see our books of accounts compliance service.
Key takeaways
- Business income under section 26 is computed as per sections 28 to 60, except section 58.
- Section 28 allows insurance, land revenue and local taxes, rent as a tenant, and current repairs.
- Where an asset is only partly used for business, the deduction is limited to the fair proportionate part decided by the Assessing Officer.
- Section 30 allows stock insurance, cattle life insurance by a federal milk co-operative society and employer health insurance paid other than in cash.
- The sections print no ratio or amount.
- Later amendments, rules and notifications should be checked.
Read next
- Section 32: other deductions in computing business income
- Section 35: amounts not deductible in computing business income
- Section 26: business income
- Section 31: bad debts
Disclaimer: Based on the Income-tax Act, 2025 (30 of 2025) as amended by the Finance Act, 2026, as consulted on 2 October 2026. It explains the words of the Act only; the Income-tax Rules, 2026, notifications, circulars, later amendments and the way the tax authorities and courts apply these provisions should be checked. This article is general information, not legal advice; check the official text before acting.