Section 25A(1) Common Section for Arrears of Rent and Unrealized Rent Received Subsequently

Difference between Unrealized Rent and Arrears of Rent

As per Section 25A(1)

In Case of
Arrears of Rent
or
Unrealized Rent
Is
Received Subsequently

It shall be deemed to be income from house property
in the financial year in which such rent is received or realised, and

It shall be included in the total income of the assessee under the head “Income from house property”,
whether the assessee is the owner of the property or not in that financial year.

Note
Standard Deduction of 30% will also be available

Effect of Amendment

Earlier there were Separate Sections for

Unrealized Rent (Section 25AA)

And Arrears of Rent (Section 25B)

Now a common section has been introduced in their place.

Example

Mr. Anand sold his residential house property in March, 2016.

In June, 2016, he recovered rent of Rs. 10,000 from Mr. Gaurav, to whom he had let out his house for two years from April 2010 to March 2012. He could not realise two months rent of Rs. 20,000 from him and to that extent his actual rent was reduced while computing income from house property for A.Y.2012-13.

Further, he had let out his property from April, 2012 to February, 2016 to Mr. Satish. In April, 2014, he had increased the rent from Rs12,000 to Rs15,000 per month and the same was a subject matter of dispute. In September, 2016, the matter was finally settled and Mr. Anand received Rs. 69,000 as arrears of rent for the period April 2014 to February, 2016.

Would the recovery of unrealised rent and arrears of rent be taxable in the hands of Mr. Anand, and if so in which year?