Skip to content

How to compute actual rent while computing gross annual value of a property which is let-out throughout the year?

QuestionsCategory: Income TaxHow to compute actual rent while computing gross annual value of a property which is let-out throughout the year?
1 Answers
Profile photo of SaraRaoSaraRao Staff answered 2 months ago

Actual rent means the rent for which the property is let out during the year. While computing actual rent, rent pertaining to vacancy period is not to be deducted. However, unrealised rent (*) is to be deducted from actual rent if conditions specified in this regard are satisfied.
(*) Unrealised rent is the rent of the property which the owner of the property could not recover from the tenant, i.e., rent not paid by the tenant. If following conditions are satisfied, then unrealised rent is to be deducted from actual rent of the year:
➣  The tenancy is bona fide.
➣  The defaulting tenant has vacated the property, or steps have been taken to compel him to vacate the property.
➣  The defaulting tenant is not in occupation of any other property of the taxpayer.
➣  The taxpayer has taken all steps to recover such amount, including legal proceedings or he satisfies the Assessing Officer that legal proceedings would be useless.
Illustration
Mr. Raj owns a bungalow. Throughout the year 2015-16 the bungalow is rented to Mr. Kumar at a monthly rent of Rs. 84,000. Due to internal dispute, Mr. Kumar did not pay rent for the month of March, 2016. What will the amount of actual rent to be used to compute gross annual value of the property?
**
Rent for the month of March, 2016 is not received and, hence, unrealised rent will come to Rs. 84,000.
While computing gross annual value of the property, unrealised rent of Rs. 84,000 will be deducted from actual rent. Thus, actual rent to be considered while computing gross annual value will come to Rs. 9,24,000 (Rs. 10,08,000 – Rs. 84,000 unrealised rent). Unrealised rent of Rs. 84,000 will be deducted from actual rent if all the conditions discussed in this regard are satisfied.
If any of the conditions specified in this regard is not satisfied, then while computing gross annual value, actual rent will be taken as Rs. 10,08,000 (i.e., rent for entire year without deducting unrealised rent of Rs. 84,000).​