Moment guide · FY 2026-27

I am claiming home office expenses as a freelancer

Can I deduct home rent and electricity as business expenses?

Home office expenses — proportionate rent, electricity, internet and depreciation on the business-used area — are deductible under section 37 for self-employed professionals and freelancers. Salaried employees cannot claim them against salary. The deduction must be apportioned for business use, and depreciation on the home portion reduces the cost basis for a future capital gains computation.

The #1 trap

Salaried employees claim 'work from home' expenses as deductions — they cannot; home office deductions under section 37 belong to self-employed and freelancer income, not salary. For the self-employed, claiming 100% of home costs without area/time apportionment invites disallowance under section 38, and claiming depreciation on the home portion permanently lowers the cost basis for capital gains later.

Tanvi, freelance designer working from a rented home

Tanvi is a freelance designer earning ₹18,00,000 from client projects. She works from a rented 2-BHK flat of 1,200 square feet, using one room of 200 square feet exclusively as a studio, which is one-sixth of the area. Her annual rent is ₹4,80,000, electricity ₹72,000 and internet ₹18,000. Under section 37 she claims one-sixth of each: rent of ₹80,000, electricity of ₹12,000 and internet of ₹3,000, totalling ₹95,000 of home office expenses. The apportionment is by area, and she documents it with a floor plan and a work log, because claiming the full rent would invite a disallowance under section 38. Her business income is ₹18,00,000 minus the ₹95,000 home expenses minus her other costs like software and equipment, which are separately deductible. Tanvi's friend, who is a salaried employee working from home, cannot claim any of these — the home office deduction does not apply to salary income. Tanvi also bought a ₹60,000 desk, chair and monitor, which she depreciates at 15% on the written-down value method. If Tanvi owned the flat instead of renting, she could claim depreciation on the one-sixth business portion of the building, but that depreciation would reduce the cost basis of the flat when she sells it, lowering the capital gain exemption math under section 54 if she ever reinvests. Her rent is below ₹50,000 a month, so no TDS under section 194IB is involved. She keeps the rent receipts, utility bills and the apportionment note for her ITR-3 filing. A quick call with us dials in the final figure. Tanvi also records her time split, because the apportionment should reflect both area and time: if she uses the studio room full-time but shares the internet and electricity with the family, she claims the full room cost but only a share of the utilities. The depreciation on the desk and chair at 15% WDV is claimed in the year of purchase, and the same assets are not expensed again. If she ever buys office equipment for personal use, the deduction is disallowed, so she keeps the invoices separate. Her client reimbursements for travel are income, and the matching travel costs are deductible under section 37, but she never nets them before declaring the gross receipts. A quick call with us dials in the final figure.