In this guide
Tax planning can legally reduce tax, but a genuine deduction is very different from simply relabelling a personal expense as a business cost. Many popular “tax hacks” sound almost too good to be legal, but their validity depends on documentation, business purpose and specific conditions under the Income-tax law.
One important 2026 transition point: AY 2026-27, relating to FY 2025-26, continues under the Income-tax Act, 1961. From 1 April 2026, income of Tax Year 2026-27 is governed by the Income Tax Act, 2025.
1. Claim Genuine Business Expenses
A freelancer, professional or business owner can deduct qualifying expenses incurred wholly and exclusively for business or profession. Section 37 specifically excludes personal and capital expenditure from the general business-expense deduction.
Potential business expenses may include:
- Office rent;
- Business internet and telephone costs;
- Client-meeting travel;
- Professional subscriptions;
- Advertising;
- Staff costs; and
- Genuine business meals or meeting expenses.
But buying an expensive phone, eating at a restaurant or using a cab does not automatically make the cost deductible. If an expense has both personal and business use, only the defensible business portion should ordinarily be claimed.
2. Combine Business and Personal Travel Carefully
A genuine business trip can involve deductible airfare, accommodation and related business expenditure.
However, converting a holiday into a “business trip” merely by recording a few videos or scheduling one informal meeting is risky.
For example, a content creator travelling specifically to produce monetised travel content may have a legitimate business connection. But expenditure relating to a spouse’s personal travel, sightseeing or additional vacation days should not automatically be charged to the business.
The practical test remains whether the expense was genuinely incurred for earning business or professional income under the applicable deduction rules.
Keep itineraries, meeting records, invoices, content-production evidence and the basis used for any personal/business allocation.
3. Use Depreciation on Business Assets
Buying an asset for business does not always mean deducting its entire purchase price immediately. Depreciation may instead be available where the taxpayer owns the asset and uses it for business or profession.
For AY 2026-27, commonly applicable old-law rates include:
| Asset | General depreciation rate |
|---|---|
| Non-residential business building | 10% |
| Furniture and fittings | 10% |
| Regular motor car not used on hire | 15% |
| General plant and machinery | 15% |
| Computers/software | 40% |
These rates apply on the prescribed written-down-value/block basis.
Therefore, a ₹10 crore office does not automatically produce a simple ₹1 crore deduction in every case. Land value, the relevant block, actual use and other depreciation rules must first be considered.
4. Remember: Business Tax Is Based on Taxable Profit, Not Just Turnover
For taxpayers maintaining regular books, taxable business income is broadly determined after allowable expenditure and depreciation rather than merely taxing every rupee of gross receipts.
But this does not mean every cash outflow can be deducted.
Personal expenses are disallowed, capital assets are generally dealt with through depreciation or other specific provisions, and special regimes such as presumptive taxation operate differently.
Also, do not assume salary is always taxed more heavily than business income. For AY 2026-27, the new regime provides slabs starting at nil up to ₹4 lakh and Section 87A rebate up to ₹60,000 where qualifying total income does not exceed ₹12 lakh.
5. Borrowing Against an Asset Can Defer a Taxable Sale—But It Is Not Free Money
If you own shares, property or another appreciating asset, selling it can trigger capital-gains taxation. Borrowing against that asset generally does not itself constitute a sale.
This can provide liquidity without immediately disposing of the asset.
However, it should not be marketed as a permanent “capital gains tax escape.” The loan must eventually be serviced, interest can be substantial and selling the asset later can still trigger tax.
Further, interest is deductible as a business expense only where the borrowed capital satisfies the applicable business-purpose conditions. Section 36(1)(iii), for example, provides for interest on capital borrowed for business or profession, subject to its conditions.
Taking a personal loan against investments does not automatically make its interest tax-deductible.
6. Share-Market Gains Reinvested in a House: Usually Think Section 54F, Not Section 54
This is one of the biggest misconceptions.
Section 54 principally deals with long-term capital gains from selling a residential house and reinvesting in another residential house.
If an individual or HUF earns long-term capital gains from shares or another qualifying asset other than a residential house, the relevant old-law exemption is generally Section 54F, subject to detailed conditions.
Key conditions include:
- Purchase one residential house in India within one year before or two years after transfer; or
- Construct it within three years;
- Comply with restrictions relating to ownership of other residential houses; and
- Invest the required amount of net consideration for full exemption.
Eligible investment for Section 54F is capped at ₹10 crore. Unused qualifying amounts may also need to be deposited into the Capital Gains Account Scheme by the applicable return-filing deadline.
So selling ₹10 crore of shares with a ₹3 crore gain does not necessarily mean that investing only the ₹3 crore profit will eliminate the entire tax.
7. A Crypto Platform Cannot Simply Convert VDA Tax Into Slab-Rate Tax
Taxpayers should be particularly cautious with claims that trading crypto through a particular exchange or “tokenised” platform automatically removes India’s special VDA tax.
For AY 2026-27, Section 115BBH taxes income from transfer of a qualifying Virtual Digital Asset at 30%, plus applicable surcharge and cess. Apart from cost of acquisition, expenditure deductions and loss set-off are heavily restricted.
Section 194S also provides for 1% TDS on qualifying VDA transfer consideration, subject to prescribed conditions and thresholds.
Whether an instrument is legally a VDA depends on its statutory characteristics—not simply what an exchange calls the product. A platform describing a transaction as “speculative trading” does not by itself override Indian tax law.
Frequently Asked Questions
Can I claim my iPhone as a business expense?
Potentially, if it is genuinely used for business. Depending on the nature of the asset, depreciation rather than an immediate full deduction may apply, and personal use should not automatically be claimed.
Can I claim my family vacation because I made YouTube videos there?
Only genuine business-related expenditure should be claimed. Simply creating content during an otherwise personal vacation does not automatically convert the entire trip into a deductible business expense.
Can a business claim depreciation on a luxury car?
A qualifying car owned and used for business can fall within the applicable depreciation block, but personal use, ownership and actual business purpose remain relevant. The general old-law rate for a non-hire motor car is 15%.
Is loan money taxable income?
A genuine loan receipt is fundamentally different from income earned or capital gains arising on sale. But borrowing creates repayment and interest obligations, and interest deductibility depends on how the borrowed money is used.
Can share-market LTCG become fully tax-free by buying a house?
Section 54F can provide exemption where all conditions are satisfied, but full exemption generally requires the qualifying investment formula based on net sale consideration—not merely investing the profit amount.
Can crypto gains be taxed at my normal slab rate by changing exchanges?
Not merely by changing platforms. Where the asset qualifies as a VDA under Indian tax law, the special VDA taxation provisions apply.
