Treatment of notional rent in balance sheet

This query is : Resolved

Amit Kothari (Querist)
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05 August 2015
Mr. X has 2 house
1. Self Occ
2. Deemed Let out on Annual Rent 250000/-

Now while making Personal Balance Sheet

How to show this "Notional Income" ?

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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02 August 2025 Great question! Here's how **notional rent (deemed rent)** is treated in a **personal balance sheet**:

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### Situation Recap:

* Mr. X owns **2 houses**:

* One is **self-occupied** (no rental income).
* The other is **deemed let out** with **annual notional rent of ₹2,50,000**.

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### Treatment of Notional Rent in Balance Sheet

1. **Balance Sheet Purpose**
The balance sheet shows **assets, liabilities, and net worth** at a point in time. It’s a snapshot, not a profit/loss statement.

2. **Notional Rent: Income or Asset?**

* Notional rent is **not actual cash received**; it is **imputed income** for income tax purposes.
* In the balance sheet, you **do not show notional rent as an asset or cash** since it is not realized.
* Instead, the **house itself is shown at cost or fair market value** as a fixed asset or investment property (depending on the nature of ownership and accounting policies).

3. **How to Show in Balance Sheet?**

* Show the **house as a fixed asset / investment property at cost or market value** under assets.
* Do **NOT show notional rent as an asset or income in the balance sheet**.
* You may show the **accrued rental income (if any) as a receivable only if there is actual due rent, which is rare for deemed let-out property**.

4. **For Personal Wealth Statement / Net Worth**

* You may prepare a **separate statement of income and expenses**, where notional rent is shown as income for assessing your total income.
* The balance sheet reflects the value of assets (houses), not the imputed income.

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### Summary Table:

| Item | Treatment in Personal Balance Sheet |
| ----------------------- | ------------------------------------------------------------ |
| Self-occupied House | Show under Fixed Assets at cost or market value |
| Deemed Let Out House | Show under Fixed Assets/Investments at value |
| Notional Rent Income | **Do NOT show as asset or income in balance sheet** |
| Accrued Rent Receivable | Only if actual rent due and unpaid (rare for deemed let out) |

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### In Short:

* **Balance sheet shows the property as asset.**
* **Notional rent is only for income tax and income statements, not balance sheet.**

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If you want, I can help you draft the balance sheet presentation or suggest a format for income statement to show notional rent. Would you like that?

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