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CA Intermediate · Taxation · Income from House Property

Sunil sold a let-out building on 1 November 2026 and received on 1 March 2027 arrears of rent of Rs 90,000 relating to earlier years, not charged to tax before. He is no longer the owner. What is the tax treatment under the Income-tax Act, 2025 for tax year 2026-27?

The arrears are taxable in the year of receipt under income from house property, even though the owner has sold the building. A flat 30% deduction applies, so Rs 63,000 is taxable for tax year 2026-27.

  1. ATaxable as income from house property after 30% deduction, i.e. Rs 63,000, in the year of receiptCorrect
  2. BTaxable in full as income from other sources
  3. CNot taxable because he no longer owns the property
  4. DTaxable in the earlier years to which the rent relates

Explanation

Arrears of rent received are taxed in the year of receipt as income from house property, whether or not the person remains the owner. A 30% deduction is allowed, so taxable amount is 90,000 − 27,000 = 63,000. Treating it as other sources or exempt is wrong.

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