Income under head house property (unrealised rent)

Originally posted by : Rohit
	My Query is related to Unrealised Rent Under Income Tax Act,1961.. Suppose Expected Rent = `3,00,000 and Actual Rent = `30,000 per month.  Unrealised Rent was `1,20,000 . Solution : 1. Expected Rent = `3,00,000 and Actual Rent = `3,60,000  - `1,20,000 = `2,40,000 [ done as per Sec. 25A of ITA,1961 ] 2. Higher of Expected Rent and Actual Rent is `3,00,000 , So `3,00,000 will be Chargeable. My Question : If you are charging `3,00,000 , then what is the benefit of giving deduction of unrealised rent ( `1,20,000 )

Case 1: Let us suppose, deduction of unrealised rent is not allowed, then GAV = 3,60,000

Assuming there is no municipal taxes paid and interest on borrowed capital.

GAV - Standard deduction of 30%

= 3,60,000 - 1,08,000 = 2,52,000 (Income from HP)

Case 2: Let us suppose, deduction of unrealised rent is allowed, then GAV = 3,00,000

Assuming there is no municipal taxes paid and interest on borrowed capital.

GAV - Standard deduction of 30%

= 3,00,000 - 90,000 = 2,10,000 (Income from HP)

If deduction for unrealised rent is not allowed, the assessee will have to pay extra tax on unearned income of Rs. 42,000 (2,52,000 - 2,10,000).

Unrealised rent if recovered subsequently, will be charged to tax 100% in P.Y. in which it is realised.

However, where (actual rent received  - unrealised rent) is lower due to vacancy, then ARR-UR will be treated as GAV.

Thanks for such a good answer but I still have some confusions ...

I know what I am going to ask now may not be practically possible but for clearity I am asking this question...

Suppose in above Situation Unrealised Rent is 3,60,000.

Solution :

1. Expected Rent = 3,00,000 and Actual Rent = 3,60,000 - 3,60,000 = Nil

2. GAV = 3,00,000

3. Income from HP = 2,10,000 [ GAV - SD @ 30% ]

My Confusions :

1. In this Case Actual Rent received is Nil But Still he has to pay Tax ... Why ???

2. If we are recieving deduction of 1,20,000 or 3,60,000 , our taxable income is same... there is no benefit of more or less deductions ?

Opinion of CA Dr. Girish Ahuja Sir :

According to him , there is another provision in "Return of Income Tax" under which we can deduct Unrealised Rent from GAV and not from Actual Rent to get more appropriate and good answer.

( is it true ?)

Solution according to him :

If Unrealised Rent is 1,20,000

1. Expected Rent = 3,00,000 and Actual Rent = 3,60,000

2. GAV = 3,60,000

3. NAV = 2,40,000 (GAV - Unrealised Rent i.e.3,60,000 - 1,20,000)

If Unrealised Rent is 3,60,000

1. Expected Rent - 3,00,000 and Actual Rent = 3,60,000 (Assuming No Unrealised Rent)

2. GAV = 3,60,000

3. NAV = Nil (GAV - Unrealised Rent i.e. 3,60,000 - 1,20,000)

Please tell me which approach to follow or not to follow or any other suggestion ???

You have done such a good work THANKS A LOT ..

For this question, I consulteed 2 Practicing CAs , 3 IPCC passed students and many Students who are prusing IPCC but non of them gave me a satisfactory answer.

Now I don't have even a minor problem or confusion in this concept.... 

I have One More Query But from Company Law ( Prospectus )

Click Here and please answer it also -->

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Many CCIties have answer my query on this topic but I am still not satisfied because they are just suggesting me name of good books for this topic or telling me the defination under provisions of Companies Act , 1956 .

But what I need is a good explanation to my query ...