Unrealised Rent

Unrealised rent is unpaid rent by a tenant. Learn its meaning, example, and how to calculate it accurately.
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4 min
29-August-2025

Unrealised rent is the rent that a landlord was entitled to receive but couldn’t collect because of a tenant’s default. Under Indian tax laws, landlords can claim this as a deduction, provided they meet certain conditions.

This ensures that you aren’t taxed on income that hasn’t reached your bank account. But if the tenant pays you later, the recovered amount becomes taxable in the year of receipt.

Unlike unpredictable rent collections, a Bajaj Finance FD ensures guaranteed earnings with returns up to 7.30% p.a., making it a reliable way to balance your income. Open FD.

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Example of unrealised rent

Suppose a landlord rents out a flat at Rs. 20,000 per month. If the tenant skips payments for four months, that’s Rs. 80,000 of unrealised rent.

  • The landlord can claim this Rs. 80,000 as unrealised rent deduction while filing taxes, lowering taxable rental income.
  • If, two years later, the tenant clears the dues, the recovered Rs. 80,000 becomes taxable in that financial year.

This highlights why keeping track of payments and legal communication is essential for tax compliance.

While property income can fluctuate, an FD provides fixed, timely returns. With Bajaj Finance, you can also choose monthly or quarterly payouts, creating a steady income stream. Open FD account.

What is arrears of unrealised rent?

Arrears of unrealised rent refer to rent not received earlier but recovered in a later financial year. Even if you don’t own the property anymore, the arrears are still taxable when received.

For example, if Rs. 50,000 rent wasn’t paid in FY 2022–23 but is recovered in FY 2024–25, it’s taxable in 2024–25.

To ease the burden, landlords can claim a standard deduction of 30% on the recovered amount under Section 25A of the Income Tax Act.

Instead of relying only on variable rental income, you can secure predictable earnings through a Bajaj Finance FD, backed by AAA/STABLE ratings by CRISIL and ICRA. Book an FD.

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Conditions of Unrealised Rent

To claim deductions, landlords must satisfy these conditions:

  1. Tenant default – Non-payment of rent during a specific period.
  2. Genuine recovery attempts – Legal or written communication to recover dues.
  3. Property was let out – Deduction applies only if the house was rented.
  4. Rent irrecoverable – Proof that recovery is unlikely despite efforts.

Meeting these ensures you can exclude unrealised rent from taxable income.

Just as conditions decide deductions, flexible tenure (12–60 months) in Bajaj Finance FD lets you plan investments around your financial needs. Check eligibility.

How to calculate unrealised rent

Calculating unrealised rent is straightforward. The formula is:

Unrealised rent = (Monthly rent) × (Number of months rent is unpaid)

For example, if the monthly rent is Rs. 25,000 and the tenant has not paid rent for three months, the unrealised rent will be:

Rs. 25,000 × 3 = Rs. 75,000

This Rs. 75,000 can be deducted from the gross annual rental income while filing taxes, provided all conditions are met. If the amount is later recovered, it must be added to taxable income in that financial year.

With a Bajaj Finance FD Calculator, you can instantly know your maturity value—unlike variable rent, your returns are crystal clear from day one. Check latest FD rates.

Conclusion

Unrealised rent is an important concept for landlords to understand, as it directly affects rental income and tax liabilities. The Income Tax Act provides relief by allowing deductions for unrealised rent, provided specific conditions are met.

Landlords should maintain proper records of rent payments, lease agreements, and legal communications to claim deductions effectively. If the unrealised rent is recovered later, it must be reported as income in the year of receipt.

By understanding and managing unrealised rent efficiently, landlords can optimise their tax liabilities and ensure better financial planning.

For consistent income beyond rentals, consider diversifying into Bajaj Finance Fixed Deposits. With guaranteed returns up to 7.30% p.a., flexible payout options, and safety backed by top-tier credit ratings, Bajaj Finance FDs can act as a stable complement to your property income. Open FD.

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Frequently asked questions

What is meant by unrealised rent?
Unrealised rent is the portion of rent a landlord is entitled to but has not received due to tenant default. Under Indian tax laws, landlords can claim a deduction for this amount, provided legal steps are taken to recover it. If recovered later, it becomes taxable in the year of receipt.

What is the rule 4 unrealised rent?
As per Indian tax laws, unrealised rent can be deducted from rental income if four conditions are met: tenant default, legal recovery efforts, property being rented out, and proof of irrecoverability. If later recovered, it is taxed under Section 25A of the Income Tax Act, with a 30% standard deduction allowed.

Is investing in Bajaj Finance FD safer than relying on rental income?


Yes. Rentals can fluctuate with tenant defaults, but Bajaj Finance FDs come with AAA safety ratings and assured returns, making them a secure option for financial planning. Check FD rates.

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As regards deposit taking activity of Bajaj Finance Ltd (BFL), the viewers may refer to the advertisement in the Indian Express (Mumbai Edition) and Loksatta (Pune Edition) furnished in the application form for soliciting public deposits or referhttps://www.bajajfinserv.in/fixed-deposit-archivesThe company is having a valid Certificate of Registration dated March 5, 1998 issued by the Reserve Bank of India under section 45 IA of the Reserve Bank of India Act, 1934. However, the RBI does not accept any responsibility or guarantee about the present position as to the financial soundness of the company or for the correctness of any of the statements or representations made or opinions expressed by the company and for repayment of deposits/discharge of the liabilities by the company.

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