• Sole proprietorship construction property

Dear CAs.

In my sole proprietorship, which deals in IT services, I am thinking to construct property.

I have ideas for two types of property to construct:
- Office space for my sole proprietorship (including purchase of plot).
- Rental property on a plot that I own.

Are these valid expenses for a sole proprietorship (the sole proprietorship's income will be reduced by the amounts spent on the property), or is there something I need to be aware of?

What is the status of this property if I chose to close down my sole proprietorship in the future?

Asked 2 years ago in Income Tax



Hope you are doing well!!


Property is considered as fixed assets not as expenses thus amount spent on construction/ buying is asset and you can claim depreciation on it.


in above case there is no difference between proprietary or any other type of business concern 

Lalit Bansal
CA, Delhi
770 Answers
61 Consultations

5.0 on 5.0

- In terms of taxability of income there is no difference between sole proprietorship and individual. All income whether of sole proprietorship or individual are taxable under PAN of individual only. Sole proprietorship is just a business constitution if individual wants to carry business or profession. Only expenses icurred for the profession/business are allowed against business income. Personal expenses are not allowed. Plot or/and office space are fixed assets. Only depreciation is allowed on the building and not on land. Rental income from plot will be treated as income from other sources. 

- Whether you are registered under GST or not?


Vivek Kumar Arora
CA, Delhi
4810 Answers
1013 Consultations

5.0 on 5.0

You can construct the office space on your own property and claim depreciation as an expense for the same. You won't get depreciation on the plot.

I did not understand the second option of a rental property on your own plot.


Yes claiming depreciation of office building is a valid expense.


If you close down the business it will again be considered as your personal property.


Hope you find the information helpful, if yes do rate if 5 and provide your valuable feedback for my improvement.

Thank you.

Naman Maloo
CA, Jaipur
4256 Answers
96 Consultations

5.0 on 5.0

The construction expenses are capital expenses and depreciation at the rate of 10% can be claimed against income each year. The entire property cannot be claimed as expenses nor the construction cost. For the rental property do you mean that you would be giving the property on rent?


If you close down business, this can be still your asset. 


In case of detailed consultation, request a call back



Prerna Peshori
CA, Pune
192 Answers
10 Consultations

5.0 on 5.0

- Only revenue expenses incurred for business are allowed against business income. Expenses incurred on capital assets are allocated by way of depreciation. Salaries, office rental, electricity etc are revenue expenses. Expenses incurred on car, laptop, software, building are capital assets. Dep. on building is 10% , car @ 15%, laptop and software @40% on WDV basis.

- Rs. 3 lacs would be allowed as expense by way of dep. on building in first year and later on WDV basis.


For detailed discussion you may opt for phone consultation.

Vivek Kumar Arora
CA, Delhi
4810 Answers
1013 Consultations

5.0 on 5.0

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