Unrealised rent can be claimed as a deduction from the annual rent provided it satisfies the rule 4 conditions.
Such unrealised rent which was excluded in the earlier years will be taxable in the year of receipt fully without any deduction. Whereas on Arrears of rent only 70% of the amount recieved in the year of receipt is taxable. Ie the law is providing standard deduction U/s 24 (a) of 30% on Net annual value in the case of arrears of rent just like any rent receipt.
My query is standard deduction u/s 24 (a) is denied only for unrealised rent recovered subsequently. I mean the owner should also be allowed to claim such deduction in his own right U/s 24 (a) because it is unfair and against the natural justice as the owner should not be penalised for the default of the tenant in making the rental payments in earlier years.
Please tell me whether I am correct or not by saying the above.
16 July 2011
It is known to us that reasonable expected rent RER (Out of Municipal Valuation, Standard Rent , Fair Rent)is taken as one of the criteria .
It is compared with Actual Rent Received +Vacancy Allowance . (Actual Rent =Annual Rent- Unrealised Rent).
In case actual rent is lesser than the RER we consider RER for arriving the GAV.
On RER 30% Deduction U/s 24(a) is allowed.
So it is not 100% correct to say that the assessee is not being granted any benefit in respect to Unrealised Rent.
Secondly assessee is taxed only when there is a realisation, otherwise the deduction claimed U/s 24(a) on RER prevails.
16 July 2011
Right Sir, even I agree to what you have said. Unrealised rent recovered subsequently which was not considered in annual value earlier is taxable fully in the year of receipt.
CAclubindia
