Unrealised rent is the portion of your house rent amount which is not realised from the tenant fro some reason. While deriving actual rent received or receivable for the purpose of calculating gross annual value, the unrealised rent has to be deducted from it.
Unrelaised rent will be allowed to be excluded from the rent received only when following conditions are satisfied;
- The tenancy is bona fide;
- The defaulting tenant has vacated or steps have been taken to compel him to vacate the property;
- The defaulting tenant is not in occupation of any other property of the assessee and
- The assessee has taken all the reasonable steps to institute legal proceedings for the recovery of the unpaid rent or satisfies the assessing officer that legal proceedings would be useless.
If rent is not realised from tenant and the conditions are not falling under the above mentioned four conditions then unrealised rent will not be allowed as a deduction from your actual rent received or receivable.
Any unrealised rent realised subsequently will be taxable in the year of realisation under the head income from house property. It will be taxable even if the house is not owned by you.