Arrears of house rent
Patanjali
(Querist) 23 February 2010
This query is : Resolved
If an individual receives Rs. 100000/- as the arrear of rent of past 5 years in 2009-10(as tenant increased rent from retrospective date) what will be tax treatment of such amount received by the individual in assesment year 2010-11 Is there any tax releif available to him? Please provide the related section of the Income Tax Act governing this issue.
Regards,
Patanjali
A V Vishal
(Expert) 23 February 2010
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.
Approach a CA locally who will do the needful.
Vineet
(Expert) 25 February 2010
The provision applies to amount received in arrear whcih was no taxed in earlier years. However, if in your case the rental income taxed in earlier years was more than the actual rent received (due to presumptive method of annual lettable value), you get benefit of such excess income taxed in earlier years.
Income from hosue property is taxable on annual basis irrespective of the fact whether tenant pays the rent or not as the income is computed on received/ receivable basis.
APARNA NANDAKUMAR
(Expert) 25 February 2010
The opinion of Mr.Vishal is correct. The provisions of section 25B has to be read in conjunction with section 25 AA of the Income tax Act, 1961.
Raj Kumar Makkad
(Expert) 25 February 2010
It shall be proper if you approach any Chartered Accountant rather lawyers in this matter.
