Work From Home Tax Deductions in India: What You Can Claim

If you are salaried, there is no special work-from-home deduction in India: the standard deduction (₹75,000 under the new regime, ₹50,000 under the old) is meant to cover such costs, and the real saving comes from your employer reimbursing work expenses against bills instead of paying a fixed allowance. Freelancers and business owners can deduct the business share of home office costs, unless they use presumptive taxation. These rules are for tax year 2026-27, as of October 2026.

The short answer by type of worker

Salaried employees working from home

No separate deduction, but the standard deduction applies

Salary income is taxed after a flat standard deduction: ₹75,000 under the new regime (the default, Section 202 of the Income-tax Act, 2025, old Section 115BAC) and ₹50,000 under the old regime. You get it whether you work from office or home, and you cannot claim internet, electricity or furniture bills on top of it.

Reimbursement versus allowance: the difference that matters

How your employer pays you for work costs decides the tax:

• Reimbursement against bills. Under the 1961 Act rules, telephone, mobile and broadband expenses borne or reimbursed by the employer were not a taxable perquisite (old Rule 3(7)(ix)). The Income-tax Rules, 2026 have renumbered the perquisite rules; as of October 2026 employers have generally continued treating bill-based official telephone and internet reimbursement as non-taxable, but confirm the current rule with your payroll team. Keep the bills in your name.
• Fixed allowance. A flat "WFH allowance" or "internet allowance" paid every month regardless of actual spending is generally fully taxable as salary.
• Equipment provided by the employer. A laptop or computer the employer owns and lends to you is generally not a taxable perquisite. A one-time "WFH setup allowance" paid in cash for you to keep the items is usually taxable.

If your company offers a flexible benefits plan, choosing bill-based reimbursement instead of a fixed allowance is the main legal way to reduce tax on WFH costs.

HRA when you work from home (old regime only)

HRA exemption under Section 11 and Schedule III of the 2025 Act (old Section 10(13A)) is available only in the old regime. It depends on the rent you pay and the city you live in, not where your office is. If you moved back to your hometown and pay no rent, the exemption is nil. If you live with parents and genuinely pay them rent, it can be claimed, but the parents must show that rent as income. Our HRA exemption guide covers the formula and the metro list.

Professional tax

State professional tax deducted from salary is allowed as a deduction under the old regime but not under the new regime.

Freelancers and business owners working from home

If you run a business or profession from home, genuine expenses incurred for it are deductible when you compute actual profit:

• Rent: the share of your home used for work. A common, defensible basis is floor area (for example, one room out of four).
• Electricity and internet: the business share, on a reasonable usage basis.
• Phone: the business share of the bill.
• Laptop, camera, chair and desk: depreciation, not the full price in one year (computers carry a higher depreciation rate than furniture). Claim only the business-use share.
• Software, cloud storage, platform fees and payment gateway charges: generally fully deductible if used only for work.

If you own the home, you cannot charge rent to yourself, but you can claim the business share of running costs and repairs.

Presumptive taxation: no separate expenses

Section 58 of the Income-tax Act, 2025 merged old Sections 44AD, 44ADA and 44AE. Eligible professionals declare 50% of gross receipts (receipts up to ₹75 lakh if cash receipts are within 5%), and eligible small businesses declare 6% of digital receipts or 8% of cash receipts. The deemed profit is treated as covering all expenses, so home office costs cannot be claimed separately. See our freelancer tax guide for eligibility.

Worked example 1: salaried employee (illustrative)

Rohan earns a gross salary of ₹14 lakh, works from home, and is on the new regime. His employer offers ₹1,500 a month for internet either as a fixed allowance or as reimbursement against his broadband bills.

• Taxable salary: ₹14,00,000 − ₹75,000 = ₹13,25,000
• Tax: ₹20,000 (₹4-8 lakh at 5%) + ₹40,000 (₹8-12 lakh at 10%) + ₹18,750 (₹1.25 lakh at 15%) = ₹78,750
• Plus 4% cess: ₹81,900

If the ₹18,000 a year is a fixed allowance, his taxable salary rises to ₹13,43,000 and extra tax is 15% × ₹18,000 = ₹2,700, plus cess = ₹2,808 more. As a bill-based reimbursement, the ₹18,000 is generally not taxed. Rebate does not apply because his taxable income is above ₹12 lakh.

Worked example 2: freelancer (illustrative)

Sana is a freelance designer with ₹9 lakh of receipts in tax year 2026-27, all by bank transfer. She works from a rented two-bedroom flat (₹24,000 a month rent) and uses one of four rooms only for work.

Actual-profit method

• Rent share: ₹24,000 × 12 × 25% = ₹72,000
• Electricity and internet share: ₹18,000
• Depreciation on laptop and software: ₹45,000
• Profit: ₹9,00,000 − ₹72,000 − ₹18,000 − ₹45,000 = ₹7,65,000

Presumptive method (if her work qualifies as a specified profession)

• Deemed income: 50% × ₹9,00,000 = ₹4,50,000

Under the new regime, both figures are below ₹12 lakh, so the rebate (Section 156, old Section 87A) brings her tax to nil either way. The choice matters more at higher receipts, or if she has other income. Try your own figures in the income tax calculator.

Salary plus freelancing from home

Many people work a salaried job from home and take side projects. Keep these separate:

• Home office costs can be claimed only against the freelance income, not against salary.
• You will usually file ITR-3, or ITR-4 if you use presumptive taxation and are eligible.
• Your employer's TDS will not cover tax on side income, so you may owe advance tax if tax due after TDS is ₹10,000 or more.
• Check your employment contract before taking outside work.

Records to keep

• Rent agreement and rent receipts; landlord PAN if annual rent exceeds ₹1 lakh (for HRA)
• Broadband, phone and electricity bills, ideally in your name
• Invoices for laptop, furniture and software, with the date of purchase
• A simple note of how you worked out the business-use share
• Form 130 (old Form 16), AIS and Form 26AS (moving to Form 168)

Our ITR filing checklist lists everything else you need at filing time.

Stay safe: tax refund and WFH job frauds

Work-from-home earners are targeted by two kinds of fraud. Fake "income tax refund" messages ask you to click a link and enter bank or card details; the Income Tax Department does not ask for PINs, passwords or card details by SMS or email, and refunds go straight to your pre-validated bank account. Fake work-from-home jobs ask for registration, training or deposit fees, or pay small amounts for "like and review" tasks before asking for larger deposits; legitimate employers never charge you to be hired. Never share OTP, UPI PIN or net-banking logins. If you lose money, call 1930 or report at cybercrime.gov.in at once and inform your bank.

Key takeaways

• As of October 2026, salaried employees get no separate work-from-home deduction; the standard deduction (₹75,000 new regime, ₹50,000 old) covers it.
• Bill-based reimbursement of official phone and internet costs is generally not taxable; a fixed WFH allowance generally is.
• HRA depends on rent you actually pay where you live, and only in the old regime.
• Freelancers on the actual-profit method can deduct the business share of rent, power, internet and depreciation; presumptive filers under Section 58 cannot claim expenses separately.
• Keep bills and a usage basis; tax rules and rule numbers under the new Act should be confirmed on incometax.gov.in or with a tax professional.