Difference between Unrealized Rent and Arrears of Rent
Unrealized Rent Received
Arrears of Rent Received
Rent per month =10000
Tenant fails to pay rent of 3 months due to some financial problem.
Later it pays 2 month pending rent of 20000
In this case
Unrealized Rent Recovered=10000*2=20000
Rent increased but tenant pays Old Rent
(Suppose Rent was earlier 10000 but increased to 12000.Tenant pays old rent of 10000 for 2 years.
Later it pays Arrear of Rent of 2000*15=48000
As per Section 25A(1)
In Case of
Arrears of Rent
It shall be deemed to be income from house property
in the financial year in which such rent is received or realised, and
It shall be included in the total income of the assessee under the head “Income from house property”,
whether the assessee is the owner of the property or not in that financial year.
Standard Deduction of 30% will also be available
Effect of Amendment
Earlier there were Separate Sections for
Unrealized Rent (Section 25AA)
And Arrears of Rent (Section 25B)
Now a common section has been introduced in their place.
Mr. Anand sold his residential house property in March, 2016.
In June, 2016, he recovered rent of Rs. 10,000 from Mr. Gaurav, to whom he had let out his house for two years from April 2010 to March 2012. He could not realise two months rent of Rs. 20,000 from him and to that extent his actual rent was reduced while computing income from house property for A.Y.2012-13.
Further, he had let out his property from April, 2012 to February, 2016 to Mr. Satish. In April, 2014, he had increased the rent from Rs12,000 to Rs15,000 per month and the same was a subject matter of dispute. In September, 2016, the matter was finally settled and Mr. Anand received Rs. 69,000 as arrears of rent for the period April 2014 to February, 2016.
Would the recovery of unrealised rent and arrears of rent be taxable in the hands of Mr. Anand, and if so in which year?View Answer
Both Unrealized Rent Recovered and Arrear Recovered will be taxable Under income from house Property in Year Received i.e. Financial Year 2016-17 (AY 2017-18)
Unrealized Rent Recovered = 10000
Arrear Recovered = 69000
Total = 79000
Standard Deduction = 30% of 79000 = 23700
Income from House Property = 79000 - 23700 = 55300