Treatment of unrealized rent under IFHP [Explanation to section 23(1)]

Under Income from house property, unrealized rent if any will be adjusted as per the rules prescribed below.

The Actual rent received/receivable should not include any amount of rent which is not capable of being realized.

However the conditions prescribed in Rule 4 should be satisfied. They are –

(a) The tenancy is bona fide;

(b) The defaulting tenant has vacated, or steps have been taken to compel him to vacate the property;

(c) The defaulting tenant is not in occupation of any other property of the assessee;

(d) The assessee has taken all reasonable steps to institute legal proceedings for the recovery of the unpaid rent or satisfies the Assessing Officer that legal proceedings would be useless.


Explanation to Sec. 23(1) provides that unrealized rent should be deducted from clause (b) or clause (c) of Sec. 23(1), i.e., the actual rent received or receivable. It does not provide that it should be deducted from clause (a), i.e., from expected rent. Thus, problem will arise when gross annual value is to be taken as expected rent instead of actual rent received or receivable, as the assessee in that case cannot take the deduction of unrealized rent

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