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​What is the tax treatment of arrears of rent? ​

Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 rohith asked almost 3 years ago

Hi I am CA student. I want to know about income tax. Can I know, ​What is the tax treatment of arrears of rent? ​​

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 veeru answered over 2 years ago

(a) is the owner of any property consisting of any building or land appurtenant thereto which has been let to a tenant; and (b) has received any amount, by way of arrears of rent from such property, not charged to income-tax for any previous year, the amount so received, after deducting (a sum equal to thirty per cent of such amount), shall be deemed to be the income chargeable under the head income from house property and accordingly charged to income-tax as the income of that previous year in which such rent is received, whether the assessee is the owner of that property is that year or not.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 HIMANSHU answered almost 3 years ago

​​The amount received on account of arrears of rent (not charged to tax earlier) will be charged to tax after deducting a sum equal to 30% of such arrears. It is charged to tax in the year in which it is received. Such amount is charged to tax whether or not the taxpayer owns the property in the year of receipt.​

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Open uri20170510 32134 1c996lj?1494421732 Anil answered almost 3 years ago

The provisions of rent arrears described under section 25B of Income Tax act. The section 25B exclusively deals with assessing conditions of arrears of rent received in the current financial year. Section 25B of Income Tax Act. 25B. Special provisions for arrears of rent received. Where the assessee- (a) is the owner of any property consisting of any building or land appurtenant thereto which has been let to a tenant; and (b) has received any amount, by way of arrears of rent from such property, not charged to income-tax for any previous year, the amount so received, after deducting (a sum equal to thirty per cent of such amount), shall be deemed to be the income chargeable under the head income from house property and accordingly charged to income-tax as the income of that previous year in which such rent is received, whether the assessee is the owner of that property is that year or not. This is a special provision for assessing arrears of rent when received. It lays down that where the owner of the property received any amount, by way of arrears of rent from such property, the amount so received, after deducting a sum equal to one-fourth of such amount for repairs of, and collection of rent from, the property, shall be deemed to be the income chargeable under the head income from house property as the income of the previous year in which such rent is received. In simple words we can say, any amount received as arrears of rent from a property consisting of any building or land appurtenant thereto which has not been charged to income tax in any previous year shall be taxable in the previous year in which the same is received. Let's take example that Mr X have received arrears of rent of which he had been let out. The tenant had not paid the rent for a period of almot 2 years. The above amount received in Dec.2009. Now find out the taxability of rent arrears and in which it will be assessed. Solution: The arrears of rent would be taxable in the Asst. Year 2010-11 as rent received by x on Dec. 2009. See Assessment year, and Previous year. However, X is entitled to get statutory deduction of 30 per cent. The arrears of rent received would be taxable as income from house property.

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