Income from House Property - Recovery of unrealised rent

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prashant parmar (Querist)
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06 May 2009
Let me know the treatment for recovery of unrealised rent in both cases, realised before & upto 2001-02 & 2002-03 onward with practicle steps. pls it's urgent

and when (year) adv. payment of municipal tax will be available for deduction.

Manmohan ACA, CS

Manmohan ACA, CS (Expert)
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06 May 2009 I am providng you answer from my personal notes, for example provide me e mail id
Recovery of unrealised rent
a) Unrealised rent belonging to the period prior to previous year 2001-02 [Sec. 25A]
b) Unrealised rent belonging to the previous year 2001-02 onwards. [Sec. 25AA]

(a) Unrealised rent belonging to the period prior to previous year 2001-02 [Sec. 25A]
Applicability
Applicable for recovery of an unrealised rent for which deduction has been claimed in any previous year prior to the previous year 2001-02.
Stress: Recovery may be in any year but unrealized rent must belong to the period prior to P.Y. 2001-02.
Treatment
When unrealised rent or part thereof, which was allowed as deduction previously and is realised subsequently, then the amount so realized would be chargeable to tax under the head “Income from house property” without making any deduction either u/s 23 or u/s 24. Even recovery expenditure is not allowed as deduction from above realisation.
If amount allowed as deduction is less than amount claimed then any subsequent recovery shall firstly be treated as recovery of the amount, which was not allowed earlier as deduction.
Arithmetically, taxable amount shall be positive value of -
[Recovery of Unrealised Rent – (Earlier Deduction Claimed – Earlier Deduction Allowed)]
Notes
1. The amount so recovered is taxable in the previous year in which it is recovered
2. It is taxable under the head ‘Income from house property’ even if the assessee does not own any house in the year of recovery.
3. From such amount no deduction shall be allowed. Even recovery expenditure is not allowed as deduction from such realisation.

Unrealised rent belonging to the previous year 2001-02 onwards [Sec. 25AA]
Applicability
Applicable for recovery of ‘unrealised rent belonging to the period on or after previous year 2001-02’.
Treatment
When unrealised rent or part thereof is realised subsequently, then the same would be chargeable to tax under the head ‘Income from house property’ to the extent such amount together with the actual rent receivable (ARR) of the previous year to which it relates, exceeds GAV of that year.

Arithmetically, taxable amount shall be positive value of -
[{Recovery of Unrealised Rent + (Actual Rent Receivable – Unrealised Rent)# } - Gross Annual Value#]
# For the previous year to which such unrealised rent relates.

Notes
1. The amount so recovered is taxable in the previous year in which it is recovered
2. It is taxable under the head Income from house property even if the assessee does not own any house in the year of recovery.
3. From such amount no deduction shall be allowed. Even recovery expenditure is not allowed as deduction from such realisation.

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