Changes in Taxation of Arrears of Rent and Unrealised Rent: Clause 23 of Income Tax Bill, 2025, with Section 25A of Income-tax Act, 1961

Clause 23 Arrears of rent and unrealised rent received subsequently.

Income Tax Bill, 2025

1. Introduction

The proposed Clause 23 of Income Tax Bill, 2025, aims to modify the existing provisions u/s 25A of the Income-tax Act, 1961, regarding the taxation of arrears of rent and unrealised rent received subsequently. This analysis examines the key changes and their implications.

2. Structural Changes

2.1 Title Modification

• Existing: "Special provision for arrears of rent and unrealised rent received subsequently"
• Proposed: "Arrears of rent and unrealised rent received subsequently"
• Change: Removal of the word "Special" indicates mainstreaming of this provision

3. Substantive Changes

3.1 Time Period Reference

• Existing: Uses "financial year"
• Proposed: Uses "tax year"
• Implication: Alignment with new terminology in the 2025 Bill

3.2 Structure and Organization

The new clause maintains the same basic structure with three subsections but presents them more clearly:

• Sub-section (1): Basic charging provision
• Sub-section (2): Inclusion in total income
• Sub-section (3): Deduction provision

4. Key Provisions Retained

4.1 Charging Mechanism

4.2 Both versions maintain:

• Treatment of arrears/unrealised rent as income from house property
• Taxation in the year of receipt/realization
• Applicability regardless of current ownership status
• 30% standard deduction

5. Notable Differences

5.1 Language Simplification

• The new clause uses more straightforward language
• Removes redundant phrases like "as the case may be"
• Eliminates historical references and previous amendments

5.2 Structural Clarity

• Separate sub-section for inclusion in total income
• Clearer delineation of charging and computation provisions

6. Practical Implications

6.1 For Taxpayers

• Easier understanding due to simplified language
• Consistent treatment of income
• Maintained benefits of standard deduction

6.2 For Tax Administration

• Clearer implementation framework
• Reduced scope for interpretation disputes
• Better alignment with modern tax terminology

7. Conclusion

The proposed Clause 23 represents a refinement rather than a fundamental change to the existing provisions. The changes focus on clarity, simplification, and modernization of language while maintaining the core principles of taxation for arrears and unrealised rent.

 

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Full Text:

Clause 23 Arrears of rent and unrealised rent received subsequently.

 

Dated: 28-2-2025