Section 25A of ITA, 1961 : Section 25A: Special Provision For Arrears Of Rent And Unrealised Rent Received Subsequently

Explanation using Example

Imagine Mr. Sharma owns an apartment which he rents out to Mr. Gupta. Due to some financial difficulties, Mr. Gupta couldn't pay the rent for 6 months in the financial year 2020-2021. In the next financial year, 2021-2022, Mr. Gupta manages to pay the outstanding rent (arrears of rent) along with the current rent. According to Section 25A of The Income-tax Act, 1961, Mr. Sharma must include this arrears of rent as part of his income from house property for the financial year 2021-2022, even though the rent pertains to the previous year.

Moreover, Mr. Sharma is allowed to claim a deduction of thirty percent on the amount of the arrears of rent received, which is intended to cover any expenses he might have incurred in maintaining the property during the period when the rent was unpaid.