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Microlesson · 5-min read

Arrears of Rent and Unrealised Rent Received Subsequently [Section 25A]

# Arrears of Rent & Unrealised Rent Recovered Later [Section 25A]

This section handles rent received in a later year — either as arrears (previously due but unpaid) or as unrealised rent that is finally recovered.

## Charging Provision [Sec 25A(1)]

  • Any arrears of rent or unrealised rent received subsequently is taxed as Income from House Property in the year it is received.
  • It is taxable irrespective of whether the assessee still owns the property in the year of receipt.

## Standard Deduction [Sec 25A(2)]

  • A flat 30% deduction is allowed on such arrears / recovered unrealised rent.
  • Net taxable amount = 70% of the amount received.

## Why This Matters

  • Even a former owner (who has since sold the property) is taxed when old dues are recovered.
  • No other expense deduction is allowed against it — only the flat 30%.

Worked example

### Example 1

Example: Mr. D let out a property and could not collect ₹1,00,000 of rent in earlier years (treated as unrealised). In PY 2025-26 he recovers ₹1,00,000 — even though he sold the house in 2024.

  • Taxable as House Property income in PY 2025-26, despite no longer owning the house.
  • Deduction = 30% × ₹1,00,000 = ₹30,000.
  • Taxable amount = ₹70,000.

⚠️ Common exam mistakes

  • Treating recovered unrealised rent as non-taxable because the assessee no longer owns the property — ownership in the year of receipt is irrelevant under Sec 25A.
  • Taxing the full amount received — a flat 30% deduction is allowed, so only 70% is taxed.
  • Taxing arrears in the year they originally became due rather than the year of receipt.
Reference: Section 25A — Income-tax Act, 1961
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