Treatment of unrealised rent Explanation to Section 23(1)/Rule 4

Treatment of unrealised rent Explanation to Section 23(1)/Rule 4

Unrealised rent means such rent which is irrecoverable and is considered to be loss i.e. bad debt and in such cases, expected rent shall be computed for full year and while computing rent received or receivable, such unrealised rent shall be excluded and GAV shall be higher of expected rent and rent received/receivable.(no special treatment like vacancy).

Eg:. Mr. X has let out one house Rs.50,000 p.m. , fair rent Rs.45,000 p.m., municipal valuation Rs.40,000 p.m. standard rent Rs.70,000 p.m. and there was unrealized rent for 3 months, in this case GAV of the house shall be

Expected rent (45,000 x 12)                                                                                                                                             5,40,000

Rent received /receivable (50,000 x 9)                                                                                                                                             4,50,000

GAV                                                                                                                                             5,40,000

Rent  shall  be  considered  to  be  unrealised  rent  only  if  all  the  conditions  of  Rule 4  have  been  complied  with  and  such  conditions are:

(a)     the defaulting tenant has vacated, or steps have been taken to compel him to vacate the property;

(b)     the defaulting tenant is not in occupation of any other property of the assessee;

(c)     the assessee has taken all reasonable steps to institute legal proceedings for the recovery of the unpaid rent or satisfies the Assessing

Officer that legal proceedings would be useless.

(d)     the tenancy is bona fide (genuine)

Recovery of unrealised rent Section 25A –

If any assessee has recovered unrealized rent in subsequent years, rent so recovered shall be considered.to be income of the assessee under the head house property and it do not matter whether the assessee has any house property in his name in that year or not. If assessee has received any interest, it will be considered to be income of the assessee under the head other sources. If assessee has incurred any expenses on legal proceedings, - it will not be allowed to be deducted.

A sum equal to thirty per cent of the unrealised rent shall be allowed as deduction.

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