CALCULATION OF GROSS ANNUAL VALUE WHEN PARTY LET

OUT PARTY VACANT WITH UNREALISED RENT

Treatment of unrealised rent [Explanation to Sec. 23(1)]

As per the Explanation, the actual rent received or receivable mentioned in Sec. 23(1)(b) and (c)
shall not include the amount of rent which the owner cannot realise, subject to the rules made in
this behalf. In other words, unrealised rent, if any, should be deducted from clause (b) or (c ) of
Sec. 23(1).
Rules for unrealised rent
The amount of rent which the owner cannot realise shall be equal to the amount of rent payable
but not paid by a tenant of the assessee and so proved to be lost and irrevocable where-
(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.
QUESTION:
ABC furnishes the following particulars in respect of a house property owned by him in delhi.
Particulars Amount
Municipal Value 1,00,000
Fair Rent 1,40,000
Actual Rent (per month) 11,000
Municipal Tax paid during the year 10,000

The tenant vacated the property on 31.10.2012 and thereafter the property was let out for Rs.
15,000 p.m.
ABC could not realise the rent for the months of September and October, 2012 due to the death
of the earlier tenant.
Query i) Compute the annual value of the property for the assessment year 2013-14.
Query ii) What will be your answer if the unrealised rent is for one month instead of two
months?
SOLUTION:
QUERY 1.
 Particulars Amount (in
Rs.)
Step I: Determine the value as per Sec. 23(1)(a) 1,40,000
It shall be Rs. 1,00,000 or Rs. 1,40,000, whichever is higher
Step 2-Actual rent received /receivable 1,52,000
(Rs. 11,000*7 + 15,000*5)
Gross Annual Value 1,52,000
Less: Unrealised Rent 22,000
Less: Municipal Tax Paid 10,000 32,000
Net Annual Value 1,20,000

QUERY 2:
Particulars Amount(In
Rs.)
Step1: Determine the value as per Sec 23(10(a) 1,40,000
It shall be Rs. 1,00,000 or Rs. 1,40,000, whichever is higher
Step 2: Actual rent received/receivable 1,52,000
(Rs. 11,000*7 + 15,000*5)
Gross Annual Value 1,52,000
Less: Unrealised Rent 11,000
Less: Municipal Tax Paid 10,000 21,000
Net Annual Value 1,31,000

AKANCHA BANSAL
151