How Indian landlords can deduct unpaid rent as unrealised rent for tax relief
Landlords in India may claim tax deductions on rent that was contractually due but not received, provided they meet specific Income Tax Rules conditions.
Indian property owners facing non-paying tenants can treat the missed payments as "unrealised rent" and deduct them from their house-property income, subject to the Income Tax Rules. The deduction is reflected after reporting gross rent and the unrealised portion on the chosen Income Tax Return form—eligible residents up to Rs 50 lakh may use ITR-1, while others use ITR-2, ITR-3 or ITR-4 based on business income. The net annual value is then reduced by a standard 30% under Section 24(a) and eligible interest under Section 24(b).
To qualify, the tenancy must be genuine, the tenant must have vacated or be subject to eviction steps, and the landlord must have pursued reasonable legal recovery efforts. Landlords should keep lease agreements, rent ledgers, correspondence, legal notices and proof of recovery attempts. If the rent is later recovered, Section 25A treats it as income in the year of receipt, still allowing a flat 30% deduction.
Why it matters
Understanding these rules helps Indian landlords reduce tax liability when tenants default on rent.
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