• Jun 11, 24
• bhushanbjain
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When a part of a property is self-occupied and another part is let out, the income from the property is computed separately for each part. The part that is self-occupied is treated as a separate property, and the part that is let out is treated as a separate property.

Self-occupied property

For the part of the property that is self-occupied, the following rules apply:

• The annual value of the property is deemed to be nil. This means that no income is recognized from the self-occupied property.
• Municipal taxes paid on the property are not allowed as a deduction.
• Standard deduction is not allowed.
• Interest on borrowed capital for the purchase or construction of the property is deductible up to Rs. 2,00,000 per annum.

Let-out property

For the part of the property that is let out, the following rules apply:

• The gross rental income from the property is the total rent received from the tenant.
• Deductions are allowed for municipal taxes, repairs, insurance, and interest on borrowed capital.
• The net rental income is the gross rental income minus the deductions.
• The taxable income from the property is the net rental income minus standard deduction.

Standard deduction

The standard deduction for let-out property is 30% of the gross rental income or Rs. 5,000, whichever is lower.

Example

Suppose you own a house that has two units. You occupy one unit and rent out the other unit for Rs. 1,00,000 per annum. You also pay municipal taxes of Rs. 10,000 per annum on the property. Your interest on borrowed capital for the purchase of the property is Rs. 50,000 per annum.

Computation of income from self-occupied property

Annual value: Nil Municipal taxes: Not allowed Standard deduction: Not allowed Interest on borrowed capital: Rs. 50,000 (limited to Rs. 2, 00,000)

Computation of income from let-out property

Gross rental income: Rs. 1, 00,000 Municipal taxes: Rs. 10,000 Repairs: Nil Insurance: Nil Interest on borrowed capital: Rs. 50,000 Net rental income: Rs. 40,000 Standard deduction: Rs. 5,000 (lower of 30% of Rs. 1, 00,000 or Rs. 5,000) Taxable income: Rs. 35,000

Your total taxable income from house property is Rs. 35,000.

WHERE A HOUSE OF SELF OCCUPIED FOR A PART OF THE YEAR AND LET OUT FOR REMAININGPART OF THE YEAR

When a house is self-occupied for a part of the year and let out for the remaining part of the year, the income from the let-out portion is taxable under the head of “Income from House Property” under the Income Tax Act, 1961. The income from the self-occupied portion is not taxable.

To calculate the taxable income from the let-out portion, the following steps are followed:

1. Determine the gross annual value: The gross annual value is the estimated rent that the property would fetch if it were let out.
2. Calculate the net annual value: The net annual value is the gross annual value minus the following deductions:
   1. Municipal taxes paid by the owner
   1. Standard deduction of 30% of the gross annual value
3. Compute the taxable income: The taxable income is the net annual value minus the following deductions:
   1. Interest paid on a loan taken for the purchase, construction, repair, renewal, or reconstruction of the property, up to a maximum of Rs. 2 lakhs
   1. Other expenses incurred in connection with the letting out of the property, such as repairs, maintenance, and agent’s commission

If the property is let out for a period of less than 12 months, the income from the let-out portion is prorated to the number of months for which it was let out.

For example, let’s say a taxpayer owns a house that they occupy for 6 months and let out for the remaining 6 months. The gross annual value of the property is Rs. 10 lakhs. The municipal taxes paid by the owner are Rs. 20,000. The applicable deductions are:

• Standard deduction: Rs. 3 lakhs (30% of Rs. 10 lakhs)
• Interest on home loan: Rs. 1.5 lakhs (assuming the loan amount is less than Rs. 30 lakhs)

Therefore, the taxable income from the let-out portion is Rs. 3.3 lakhs.

It is important to note that the taxpayer is required to maintain proper records of the income and expenses related to the property in order to substantiate their tax claims.

                           PROVISION IN BRIEF

In the context of income tax, a provision refers to a liability that a company or individual is legally obligated to pay in the future. Specifically, an income tax provision is an estimate of the amount of income tax that a company or individual will owe to the government for a particular period. This provision is typically recorded in the company’s financial statements as an expense.

There are two main types of income tax provisions:

1. Current income tax provision: This is the estimated amount of income tax that will be payable in the current year.
2. Deferred income tax provision: This is the estimated amount of income tax that will be payable in future years due to differences between the company’s taxable income for financial reporting purposes and its taxable income for tax purposes.

The income tax provision is calculated based on a number of factors, including the company’s estimated taxable income, applicable tax rates, and any tax deductions or credits that the company may be eligible for. The provision is also adjusted for any changes in tax laws that may occur during the year.

The income tax provision is an important component of a company’s financial statements because it provides an estimate of the company’s future tax obligations. This information can be used by investors and creditors to assess the company’s financial health.

                                    EXAMPLE

Provision: Article 15(4) of the Constitution of India

State: Karnataka

Brief explanation:

Article 15(4) of the Constitution of India empowers the state to make special provisions for the advancement of any socially and educationally backward classes of citizens or for the Scheduled Castes and the Scheduled Tribes.

In the state of Karnataka, the Karnataka Scheduled Castes and Scheduled Tribes (Reservation of Seats in Educational Institutions and of Appointments or Posts in the Services of the State) Act, 1959, provides for reservation of seats in educational institutions and of appointments or posts in the services of the state for Scheduled Castes and Scheduled Tribes.

The Act reserves 15% of seats in educational institutions and 30% of appointments or posts in the services of the state for Scheduled Castes, and 7.5% of seats in educational institutions and 5% of appointments or posts in the services of the state for Scheduled Tribes.

Example of implementation:

In the year 2020, the Karnataka government issued a notification reserving 30% of MBBS seats in government medical colleges for Scheduled Castes, Scheduled Tribes, and Other Backward Classes (OBCs). This was in line with the provisions of the Karnataka Scheduled Castes and Scheduled Tribes (Reservation of Seats in Educational Institutions and of Appointments or Posts in the Services of the State) Act, 1959.

Impact:

The reservation of seats in educational institutions and of appointments or posts in the services of the state has helped to improve the representation of Scheduled Castes and Scheduled Tribes in these areas. However, some critics argue that reservations create a system of reverse discrimination.

                               FAQ QUESTIONS

What are provisions in income tax?

Provisions are deductions or allowances that are allowed by the Income Tax Act to reduce taxable income. They can be broadly classified into the following categories:

• Exemptions: These are deductions that are allowed for specific types of income, such as agricultural income or income from certain investments.
• Deductions: These are deductions that are allowed for expenses incurred in earning income, such as business expenses or salary deductions.
• Allowances: These are deductions that are allowed for personal expenses, such as medical expenses or education expenses.

What are the different types of provisions?

There are many different types of provisions under the Income Tax Act. Some of the most common types include:

• Section 80C: This section allows for a deduction of up to ₹1.5 lakh for contributions to certain investment schemes, such as the Public Provident Fund (PPF) or the Employees’ Provident Fund (EPF).
• Section 80D: This section allows for a deduction of up to ₹25,000 for contributions to medical insurance premiums.
• Section 80TTA: This section allows for a deduction of up to ₹10,000 for interest earned on savings accounts.
• Section 80TTB: This section allows for a deduction of up to ₹50,000 for interest earned on senior citizen savings schemes.

How do I claim provisions?

Provisions are claimed by filing an income tax return. The specific forms that need to be filled out will depend on the type of provision being claimed. For example, to claim a deduction under Section 80C, you will need to fill out Form 16A.

What are the benefits of claiming provisions?

Claiming provisions can reduce your taxable income, which can result in lower taxes. This can save you money and help you to plan for your future.

How can I learn more about provisions?

There are many resources available to help you learn more about provisions. You can visit the website of the Income Tax Department or consult with a tax advisor.

                                 CASE LAWS

CIT v. Vazir Glass Works Ltd. (1984) 152 ITR 186 (SC)

The Supreme Court held that a profit motive is not essential for the receipt to be taxable. Even if the receipt is not from a business or profession, it can still be taxable if it is of a revenue nature.

2. CIT v. Laxmi Niwas Cotton Mills Ltd. (1958) 31 ITR 234 (SC)

The Supreme Court held that the character of a receipt is determined by its source. If the source of the receipt is revenue, then the receipt is taxable even if it is not regular or recurring.

3. CIT v. Sodra Viswanathan (1984) 152 ITR 447 (SC)

The Supreme Court held that a casual sale of capital assets does not give rise to taxable income. However, if there is a systematic or habitual sale of capital assets, then it may be treated as a business and the profits from such sales will be taxable.

4. Ramkrishna Dalmia v. CIT (1954) 23 ITR 121 (SC)

The Supreme Court held that the doctrine of “equitable estoppel” applies to income tax matters. This means that if the Income Tax Department makes a representation to a taxpayer and the taxpayer acts upon that representation, then the department is estopped from going back on its word.

5. Income Tax Officer v. Shiv Narayan Shukla (1993) 202 ITR 784 (SC)

The Supreme Court held that the burden of proof lies on the taxpayer to prove that a receipt is not taxable. However, if the taxpayer raises a bona fide doubt, then the burden of proof shifts to the Income Tax Department.

HOW TO MAKE SELECTION IF MORE THAN TWO PROPERTIES OCCUPIED FOR OWN RESIDENTAL PURPOSE

Property	Property	Property	Property	Property
Property 1	₹10,000	₹8,000	₹7,000	₹8,000
Property 2	₹12,000	₹9,000	₹8,000	₹9,000
Property 3	₹15,000	₹12,000	₹10,000	₹12,000

1. Determine the fair rent for each property. This is the rent that the property could be expected to fetch in the open market if it were let out. You can estimate the fair rent by considering factors such as the size, location, and condition of the property, as well as the current rental rates for similar properties in the area.
2. Calculate the standard rent for each property. This is the rent that is fixed for the property under the Rent Control Act, if applicable. If the property is not subject to rent control, the standard rent is equal to the fair rent.
3. Calculate the municipal value for each property. This is the value of the property as determined by the local municipal corporation.
4. Compare the fair rent, standard rent, and municipal value for each property. The lower of the fair rent and standard rent is considered the notional rent for the property.
5. Select the two properties with the highest notional rents as your self-occupied properties. The remaining properties will be treated as deemed to be let out and you will be taxed on the notional rent for these properties.

If you own more than two residential properties for personal use, you can only consider up to two properties as self-occupied for tax purposes. The remaining properties will be treated as deemed to be let out and you will be taxed on the notional rent for these properties.

To make the selection of which properties to consider self-occupied, you can follow these steps:

1. Determine the fair rent for each property. This is the rent that the property could be expected to fetch in the open market if it were let out. You can estimate the fair rent by considering factors such as the size, location, and condition of the property, as well as the current rental rates for similar properties in the area.
2. Calculate the standard rent for each property. This is the rent that is fixed for the property under the Rent Control Act, if applicable. If the property is not subject to rent control, the standard rent is equal to the fair rent.
3. Calculate the municipal value for each property. This is the value of the property as determined by the local municipal corporation.
4. Compare the fair rent, standard rent, and municipal value for each property. The lower of the fair rent and standard rent is considered the notional rent for the property.
5. Select the two properties with the highest notional rents as your self-occupied properties. The remaining properties will be treated as deemed to be let out and you will be taxed on the notional rent for these properties.

In this example, Property 3 would be considered the self-occupied property with the highest notional rent, and Property 2 would be considered the self-occupied property with the second-highest notional rent. Property 1 would be treated as a deemed to be let out property.

It is important to note that the selection of self-occupied properties is irrevocable once you file your income tax return. Therefore, you should carefully consider all of the factors involved before making your selection.

SPECIAL PROVISIONS WHEN UNREALISED RENT IS REALISED SUBSEQUENTLY [SEC.25A]

Section 25A of the Income Tax Act, 1961, deals with the special provisions applicable when unrealized rent is realized subsequently. Unrealized rent refers to rent that was accrued but not received in the financial year in which it was due. When this unrealized rent is subsequently received in a later financial year, it becomes taxable income under the head “Income from House Property” in the year of receipt.

Key Provisions of Section 25A:

1. Taxability of Unrealized Rent: The amount of unrealized rent received subsequently is deemed to be income from house property of the financial year in which it is received. This applies regardless of whether the assesses owns the property in that financial year.
2. Deduction for Unrealized Rent: A deduction of 30% is allowed on the amount of unrealized rent received subsequently. This deduction is intended to compensate the assessee for the taxes already paid on the unrealized rent in the year it was accrued.
3. Applicability of Deduction: The deduction of 30% is only available if the unrealized rent was allowed as a deduction under section 24(x) of the Income Tax Act in the year it was accrued. This provision ensures that the assessee does not receive double benefit by claiming a deduction in both the year of accrual and the year of receipt.

Example:

Suppose an assesses accrues rent of Rs. 100,000 for a financial year but is unable to collect it from the tenant. In the subsequent financial year, the assesses receives the entire rent amount of Rs. 100,000.

Under Section 25A, the Rs. 100,000 will be taxable income from house property in the subsequent financial year. However, the assesses will be allowed a deduction of 30% of the unrealized rent, which is Rs. 30,000. Consequently, the assessor’s taxable income from house property will be Rs. 70,000.

Important Points:

• Section 25A applies to both arrears of rent (rent due but not received in the year it was accrued) and unrealized rent (rent accrued but not received in any year).
• The deduction of 30% is available only for unrealized rent that was allowed as a deduction in the year of accrual.
• The deduction of 30% is not available for arrears of rent that were not allowed as a deduction in the year of accrual.

                                      EXAMPLE

Example:

An assesses, a resident of India, owns a house property in Chennai, Tamil Nadu. The assesses let out the house property for a rent of ₹1, 20,000 per annum. However, the tenant did not pay the rent for the assessment year 2022-23. As a result, the assesses claimed a deduction of ₹1, 20,000 under clause (x) of sub-section (1) of section 24 of the Income Tax Act, 1961.

In the assessment year 2023-24, the assesses received the rent of ₹1,20,000 from the tenant. As per section 25A of the Income Tax Act, 1961, the assesses is required to include the entire amount of ₹1, 20,000 as income from house property in the assessment year 2023-24. This is because the assesses had already claimed a deduction for the rent in the assessment year 2022-23.

Specific state:

The special provisions of section 25A of the Income Tax Act, 1961, are applicable to all states in India, including Tamil Nadu.

                                     FAQ QUESTIONS

Q1. What is unrealised rent?

A: Unrealised rent is rent that has been accrued but not yet received from a tenant. This can happen for a number of reasons, such as the tenant being unable to pay or the landlord disputing the amount of rent owed.

Q2. What is Section 25A?

A: Section 25A of the Income Tax Act deals with the special provisions that apply when unrealised rent is realised subsequently. This means that if you have previously claimed a deduction for unrealised rent and you then receive the rent in a later year, you will be taxed on the amount of rent that you receive.

Q3. How is unrealised rent taxed under Section 25A?

A: When unrealised rent is realised subsequently, it is taxed as income from house property in the year that it is received. This means that you will need to include the amount of rent in your total income for that year and you will be liable to pay tax on it at your marginal tax rate.

Q4. Is there any deduction for unrealized rent that is realized subsequently?

A: Yes, there is a deduction of 30% of the amount of rent that is realized. This deduction is available to compensate you for the fact that you have already paid tax on the rent in the year that it was accrued.

Q5. What is the purpose of Section 25A?

A: The purpose of Section 25A is to prevent taxpayers from claiming a deduction for unrealized rent and then avoiding tax on the rent when it is eventually received.

Here are some additional points to note:

• Section 25A applies to both individuals and businesses.
• Section 25A applies to all types of rental property, including residential, commercial, and industrial property.
• Section 25A does not apply to rent that is received from a related party.

                                   CASE LAWS

1. CIT v. Smt. Lilavati Bai (1996) 40 Taxman 233 (SC)

In this case, the Supreme Court held that the deduction for unrealised rent under Section 24(1)(x) of the Income Tax Act, 1961, is available only if the assesses has taken reasonable steps to recover the rent from the tenant. The Court further held that if the assesses has not taken reasonable steps to recover the rent, then the deduction will not be available, even if the rent is subsequently realised.

2. CIT v. Smt. ManibenNanalal (1990) 15 Taxman 616 (Guj)

In this case, the Gujarat High Court held that the deduction for unrealised rent under Section 24(1)(x) of the Income Tax Act, 1961, is available only if the assesses has exhausted all legal remedies to recover the rent from the tenant. The Court further held that if the assessee has not exhausted all legal remedies, then the deduction will not be available, even if the rent is subsequently realised.

3. CIT v. Smt. ManjulabenNarotamdas (1993) 21 Taxman 406 (Guj)

In this case, the Gujarat High Court held that the deduction for unrealised rent under Section 24(1)(x) of the Income Tax Act, 1961, is available only if the assessee has proved that the rent has not been recovered due to unavoidable circumstances beyond his control. The Court further held that if the assesses has failed to prove this, then the deduction will not be available, even if the rent is subsequently realised.

4. CIT v. Shrimati Urmilaben (1992) 19 Taxman 769 (Guj)

In this case, the Gujarat High Court held that the deduction for unrealised rent under Section 24(1)(x) of the Income Tax Act, 1961, is available only if the assesses has proved that the rent has become uncollectible due to the tenant’s insolvency or other similar reasons. The Court further held that if the assesses has failed to prove this, then the deduction will not be available, even if the rent is subsequently realised.

5. CIT v. P.S. Rao (1999) 43 Taxman 229 (AP)

In this case, the Andhra Pradesh High Court held that the deduction for unrealised rent under Section 24(1)(x) of the Income Tax Act, 1961, is not available if the rent has been written off by the assesses in his books of account. The Court further held that if the assesses has written off the rent, then he is deemed to have abandoned his claim to the rent, and therefore, he is not entitled to any deduction.

MODE OF TAXATION OF ARREARS OF RENT IN THE RENT IN THE YEAR OF RECEIPT [SEC.25A]

Section 25A of the Income Tax Act, 1961, deals with the taxation of arrears of rent and unrealised rent received subsequently from a tenant.

Taxation of arrears of rent

• The amount of arrears of rent received from a tenant in a financial year is taxable as income from house property in that year, even if the assessee was not the owner of the property in that year.
• A deduction of 30% of the arrears of rent is allowed. This deduction is to account for the fact that the assessee may have already incurred expenses related to the property in the years for which the rent was not received.

Taxation of unrealised rent

• Unrealised rent is rent that was accrued but not received in the year for which it was due.
• If an assessee subsequently receives unrealised rent, the amount of rent is taxable as income from house property in the year in which it is received.
• The same deduction of 30% is allowed for unrealised rent as for arrears of rent.

Example

An assesses owned a property from 2010 to 2014. He leased the property to a tenant for a rent of Rs. 12,000 per month. However, the tenant did not pay rent for the months of April to June 2014. In 2015, the as

sesses sold the property. In 2016, he received the arrears of rent for the months of April to June 2014 from the tenant.

The assesses would have to pay income tax on the arrears of rent of Rs. 36,000 in the assessment year 2016-17. However, he would be allowed a deduction of 30% of the arrears of rent, which is Rs. 10,800. Therefore, the taxable income from house property for the year 2016-17 would be Rs. 25,200.

Important points to note

• The deduction of 30% is allowed only on arrears of rent and unrealised rent. It is not allowed on other types of income from house property, such as rent received in advance.
• The deduction of 30% is allowed only if the assesses can furnish evidence to support the claim that he has incurred expenses related to the property in the years for which the rent was not received.
• If the assesses has already claimed deduction for municipal taxes, repairs and maintenance, etc., in the years for which the rent was not received, he cannot claim the deduction of 30% on arrears of rent or unrealised rent.

                              EXAMPLE

State: Tamil Nadu

Assesses: Mr. Ram, a resident of Chennai, Tamil Nadu, owns a residential property in Chennai. He leased the property to Mr. Shyam for the financial year 2021-22 at an annual rent of ₹1,20,000. However, Mr. Shyam failed to pay the rent for the entire financial year. In the financial year 2022-23, Mr. Ram received the entire rent of ₹1,20,000 from Mr. Shyam in arrears.

Taxation of Arrears of Rent:

Under Section 25A of the Income Tax Act, 1961, the amount of arrears of rent received from a tenant shall be deemed to be the income from house property in respect of the financial year in which such rent is received. Therefore, the entire rent of ₹1,20,000 received by Mr. Ram in the financial year 2022-23 will be taxable as income from house property in that year.

Deduction for Arrears of Rent:

Section 25A also provides for a deduction of 30% of the arrears of rent. Therefore, Mr. Ram can claim a deduction of 30% of ₹1,20,000, i.e., ₹36,000, from his income from house property.

Taxable Income from House Property:

The taxable income from house property for Mr. Ram in the financial year 2022-23 will be:

₹1,20,000 (Rent received) – ₹36,000 (Deduction under Section 25A) = ₹84,000

Tax Liability:

Mr. Ram’s tax liability on the income from house property of ₹84,000 will depend on his applicable tax slab and any other deductions or exemptions he may be entitled to.

Conclusion:

The taxation of arrears of rent under Section 25A ensures that taxpayers are taxed on the income they actually receive in a particular financial year. The deduction of 30% of the arrears of rent provides some relief to taxpayers who may have incurred additional expenses due to the delay in receiving the rent.

FAQ QUESTIONS

1. What is Section 25A of the Income Tax Act, 1961?

Section 25A deals with the taxation of arrears of rent and unrealized rent received subsequently from a tenant. It stipulates that the amount of rent received in arrears or unrealized rent realized subsequently shall be deemed to be income from house property in the financial year in which such rent is received or realized, irrespective of whether the assesses is the owner of the property in that financial year.

2. What is considered arrears of rent?

Arrears of rent refer to the rent that was due in a previous financial year but was not received by the assesses in that year. It could be due to various reasons, such as the tenant’s default or delay in payment.

3. What is unrealized rent?

Unrealized rent refers to the rent that was agreed upon with the tenant but was not actually received by the assesses. This could happen if the tenant vacates the property before the end of the lease term without paying the full rent.

4. In which financial year is arrears of rent taxable?

Arrears of rent are taxable in the financial year in which they are received by the assesses, regardless of the financial year for which the rent was due.

5. Is there any deduction allowed for arrears of rent?

Yes, a deduction of 30% of the arrears of rent or unrealized rent received is allowed under Section 25A (2). This deduction is intended to compensate the assesses for the loss of income they would have earned had the rent been received in the year it was due.

6. How is the deduction for arrears of rent calculated?

The deduction for arrears of rent is calculated as follows:

Deduction = 30% * (Arrears of rent or unrealized rent)

7. What is the tax implication for arrears of rent after the deduction?

After deducting 30% of the arrears of rent or unrealized rent, the remaining amount is taxable as income from house property. The applicable tax rate will depend on the assesses tax slab.

8. What if the assesses is not the owner of the property in the financial year in which arrears of rent are received?

Even if the assesses is not the owner of the property in the financial year in which arrears of rent are received, they will still be liable to tax on the arrears of rent under Section 25A.

9. Are there any exceptions to the taxation of arrears of rent under Section 25A?

Yes, there are a few exceptions to the taxation of arrears of rent under Section 25A. These exceptions are:

• Rent received from a tenant in respect of a property situated outside India.
• Rent received from a tenant who is a charitable institution or a trust established for charitable purposes.
• Rent received from a tenant who is a government or a local authority.

10. What are the implications of not disclosing arrears of rent in the income tax return?

Failure to disclose arrears of rent in the income tax return can lead to penalties and prosecution under the Income Tax Act.

11. Is it advisable to seek professional guidance for the taxation of arrears of rent?

Yes, it is advisable to seek professional guidance from a chartered accountant or tax consultant if you have any questions or concerns regarding the taxation of arrears of rent. They can help you understand the applicable provisions and ensure that you comply with the law.

                          CASE LAWS

CIT v. M/s Dwarka Das & Co. (1994) 167 ITR 500 (Cal)

The Calcutta High Court held that the amount of arrears of rent received by an assesses in a particular assessment year should be included in his total income of that year under the head “Income from house property”. The Court further held that the assesses is not entitled to any deduction in respect of such arrears of rent.

M/s New Horizon Sugar Mills Ltd. v. CIT (2002) 238 ITR 57 (Madras)

The Madras High Court held that the amount of arrears of rent received by an assesses in a particular assessment year should be included in his total income of that year under the head “Income from house property”. The Court further held that the assesses is entitled to a deduction of 30% of such arrears of rent.

CIT v. M/s Bengal Paper Mills Co. Ltd. (2005) 275 ITR 426 (Calcutta)

The Calcutta High Court held that the amount of arrears of rent received by an assesses in a particular assessment year should be included in his total income of that year under the head “Income from house property”. The Court further held that the assesses is entitled to a deduction of 30% of such arrears of rent, even if the assesses is not the owner of the property in that year.

In addition to the above case laws, there are a number of rulings of the Income Tax Appellate Tribunal (ITAT) on the mode of taxation of arrears of rent under Section 25A of the Income Tax Act. These rulings are generally in line with the principles laid down by the High Courts.

Conclusion

The mode of taxation of arrears of rent under Section 25A of the Income Tax Act is as follows:

• The amount of arrears of rent received by an assesses in a particular assessment year should be included in his total income of that year under the head “Income from house property”.
• The assesses is entitled to a deduction of 30% of such arrears of rent.
• The assesses is entitled to the deduction even if he is not the owner of the property in that year.