UNREALISED RENT

Under section 24(1)(x) of the Act deduction is admissible in the computation of income from house property towards the amount in respect of rent from property let to a tenant which the assessee cannot realise. The deduction is however subject to such rules as may be made. Rule 4 lays down the circumstances and conditions under which the deduction is allowable.

Rule 4 specifies the following conditions for purposes of claiming the deduction :
The tenancy must be bona fide. The defaulting tenant should have vacated, or steps should have been taken by the assessee to compel him to vacate the property. The defaulting tenant should not be in occupation of any other property of the assessee. The assessee must either have taken all reasonable steps to institute legal proceedings for the recovery of the unpaid rent, or satisfy the Assessing Officer that legal proceedings would be useless.

The annual value of the property to which the unpaid rent relates must have been included in the assessed income of the previous year for which that rent was due, and tax should have been duly paid on such assessed income. The deduction allowed should in no case exceed the income under the head Income from house property included in the total income as computed without making this deduction. If, after deduction has been allowed in one year, the assessee realises the unpaid rent in a subsequent year, the amount so realised will be brought to tax under the head Income from house property in the year of receipt, irrespective of whether the assessee continues to be the owner of that property in that year or not.

COMPUTATION ON ANNUAL VALUE IN CASE OF LET OUT HOUSE, WHICH DOES NOT REMAIN VACANT DURING ANY PART OF YEAR BUT THERE IS UNREALISED RENT

COMPUTATION OF ANNUAL VALUE IN CASE OF LET OUT HOUSE WHICH REMAINS VACANT AND THERE IS UNREALISED RENT

REALISATION OF UNREALISED RENT SUBSEQUENT TO CLAIMING DEDUCTIONS

1 )where a deduction has been allowed in respect on unrealised rent and subsequently during any previous year the assessee has realised any amount in respect of such rent, then amount so realised shall be chargeable to tax. 2) If assessee incurs any expenses for realisation of unrealised rent, such expenses shall not be deducted from the amount realised and whole amount shall be included in income