It refers to the Rent which the landlord (owner) has not be able to realize

i.e. that Rent which the tenant has failed to pay

 

It is reduced from GAV along with Municipal Taxes as follows

   
Gross Annual Value XX
Less  
Municipal Taxes XX
Unrealized Rent XX
Net Asset Value XX

 

Unrealized Rent is allowed as deduction if the following condition are satisfied

  1. The tenancy is Bonafide

        (Rent agreement is  genuine)

  1. The tenant has vacated the property

        If the tenant has not vacated , than steps has been taken by land lord to Compel vacation (notice served on tenant )

  1. The tenant is not in occupation of any other property
  2. Legal proceedings has been started against the tenant for recovery or the owner has satisfied the A.O  that such legal proceedings would  be useless .

 


QUESTION

Q1 Calculate NAV 

   
Municipal Value 200000
Fair Rent 280000
Standard Rent 240000
Actual Rent Due 300000
(25000 PM*12)  
Actual Rent Paid by tenant 275000
(25000 PM*11)  
Tenant did not pay rent for last month
Municipal taxes paid by owner 6000

--answer--

     
A Municipal Value 200000
B Fair Rent 280000
C Higher of Municipal Value or Fair Rent 280000
D Standard Rent 240000
E Expected Rent (Lower of C or D) 240000
F Actual Rent 300000
G GAV 300000
  (Higher of Expected or Actual Rent)  
  Less  
H Municipal Taxes Paid -6000
I Unearned Rent(25000*1) -25000
J NAV 269000

It is assumed that all 4 conditions of Unrealized Rent satisfied

--endanswer--

 

  1. Income Tax
  2. Income From House Property
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CA Maninder Singh
CA Maninder Singh is a Chartered Accountant for the past 6 years. He provides courses for Practical Accounts, Taxation and Efiling at teachoo.com .
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