Treatment of Unrealised Rent of House Property Income

Treatment of Unrealised Rent of House Property Income

Treatment Of Unrealised Rent Recovered [Upto Assessment Year 2001-02] [Section 25A]

1.  If amount of unrealised rent recovered is less than or equal to an amount, which was disallowed earlier, it shall not be taxable.

2.  If amount unrealised rent recovered is more than the amount which was disallowed earlier, excess of amount realised over amount disallowed earlier shall be deemed as income from house property.

3.  No deduction shall be allowed out of such deemed income.

4. Such amount shall be taxable under the head ‘Income from House Property’ even if the assessee does not own that house in the current previous year.

Treatment Of Unrealised Rent Recovered [From A/Y 2002-03 Onwards] [Section 25AA]

It shall be deemed as income of the year in which recovered even if the assessee does not own the house property during the previous year in which such amount is realised.

While calculating deemed income from houses property for unrealised rent recovered, it shall be seen that on how much amount the assessee had saved tax in that previous year in which deduction was claimed. A comparison will be made between the amount of rental value on which tax has been paid and the rental value on which he would have paid tax, had there been no unrealised rent.

Special Provision For Arrears Of Rent Received [Section 25B]

In case any arrears of rent of any earlier years are recovered during the previous year, these are deemed as income from house property after allowing 30% as Standard deduction. Such arrears of rent shall be taxable in the hands of assessee even if he does not own the property (to which such arrears relate) during the previous year in which such arrears are recovered.

While calculating deemed income from house property for arrears of rent, it shall be seen that on how much amount the assessee had saved tax in that previous year to which arrears the related. A comparison will be made between the amount of rental value on which tax has been paid and the rental value on which he would have paid tax, had he received full rent in that very year.

Property Owned By Co-Owners [Section 26]

If share of co-owners is determinate, the income of such house property is calculated as one house and income is divided amongst the co-owners. They shall be entitled to relief u/s 23(2) as if they are individually owners of such property.