# Recovery of Unrealised Rent and Arrears of Rent — Section 25A

Section 25A is a deeming provision that brings to tax amounts received later in respect of property income.

## Two Types of Receipts Covered

1. Recovery of Unrealised Rent — Rent which was earlier reduced from Actual Rent (in computing Step 2 of GAV) but is now subsequently recovered.

2. Arrears of Rent — Additional rent received in the current year on account of a retrospective increase (e.g., a rent revision) pertaining to earlier years.

## Key Features

Year of Taxability: The year in which the amount is actually recovered/received.
Ownership not required: Taxable even if the assessee is NOT the owner of the property in the year of recovery (e.g., even if the property has been sold).
Head of income: Always taxed under 'Income from House Property', irrespective of current ownership status.

## Computation

```

Taxable Amount = (Unrealised Rent Recovered + Arrears Received) – 30% Standard Deduction

```

No other deduction (no Section 24(b) interest, no municipal tax) is allowed against this amount — only the flat 30%.

Worked example

### Example 1

Question: Mr. X sold his house property in March 2024. In June 2025 (PY 2025-26), he recovered ₹50,000 of unrealised rent pertaining to PY 2022-23 (which had been deducted earlier) and also received ₹20,000 as arrears of rent for an earlier period. Compute taxable income.

Solution:

Total Receipt = ₹50,000 + ₹20,000 = ₹70,000
Less: 30% Standard Deduction = ₹21,000
Taxable under House Property in PY 2025-26 = ₹49,000

This is taxable even though Mr. X is no longer the owner of the property.

⚠️ Common exam mistakes

Refusing to tax the amount because the assessee is no longer the owner — Section 25A overrides this.
Allowing additional deductions (municipal tax, interest) against the recovered amount. Only 30% standard deduction is available.
Taxing the receipt in the year to which it relates rather than the year of receipt.

Bare-Act text Section 25A · Income-tax Act, 1961 · click to expand

Section 25A: Any amount of arrears of rent received or unrealised rent realised subsequently, shall be deemed to be income from house property in the financial year in which such rent is received or realised, whether or not the assessee is the owner of the property in that financial year. A deduction of 30% of such amount shall be allowed.

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Recovery of Unrealised Rent and Arrears — Section 25A

Worked example

⚠️ Common exam mistakes