Section 23 of the Income-tax Act, 2025

Section 23 — Arrears of rent and unrealised rent received subsequently. Successor to s.25A of the 1961 Act.

Where this section sits

Section 23 is in Chapter IV — Computation of Total Income, which runs from section 13 to section 95.

What this section does

Sub-section (1) deems arrears of rent received from a tenant, and unrealised rent later realised from a tenant, to be income from house property of the tax year in which the amount is received or realised.

Sub-section (2) includes that amount in total income under the head "Income from house property", whether or not the assessee is the owner of the property in that tax year. Sub-section (3) allows a deduction of a sum equal to 30% of those arrears or unrealised rent.

Why it is there

Rent never received could not be taxed in the year it fell due; the section brings it to charge when it comes in rather than reopening the earlier year. Making the charge independent of ownership closes the escape of selling the property before collecting old dues.

Who it applies to

An assessee who receives arrears of rent from a tenant
An assessee who subsequently realises rent earlier treated as unrealised
A former owner who receives such amounts after parting with the property

The figures, and what each one turns on

Read the condition in the same row. A figure quoted without it is a wrong answer with a citation attached.

What	Figure	The condition on it	Where
Deduction from arrears of rent or unrealised rent	30%	A sum equal to 30% of the arrears of rent or the unrealised rent referred to in sub-section (1)	Sub-section (3)

What this means in practice

The year of charge is the year of receipt or realisation, not the year the rent related to, so no earlier computation is revised. Ownership at the time of receipt is expressly irrelevant, which is what catches a seller collecting old dues. The 30% in sub-section (3) is a fresh allowance computed on the arrears themselves, not the deduction already taken against annual value, and it is the only deduction the section gives.

An example

Illustrative only, and invented for this page. The figures are chosen to show the rule biting, not taken from any real matter.

An individual let a flat and Rs 2,00,000 of rent went unrealised. He sells the flat and the following year the former tenant pays that Rs 2,00,000. The whole amount is income from house property of the year of receipt, charged even though he no longer owns the flat, and a deduction of Rs 60,000 leaves Rs 1,40,000 taxable.

Where you meet this section

In the house property schedule of the return for the year the money comes in, and in queries raised where rent is reported after a property has been sold or a tenancy has ended.

The words themselves

whether the assessee is the owner of the property or not in that tax year

Section 23(2), Income-tax Act, 2025.

What people get wrong

Taxing the arrears in the years the rent related to. Sub-section (1) fixes the year of receipt or realisation.
Leaving the amount out because the property has been sold. Sub-section (2) applies whether or not the assessee is then the owner.
Treating the 30% as already claimed against annual value. Sub-section (3) gives a fresh 30% on the arrears themselves.
Deducting the actual cost of recovering the rent. The section allows only the flat 30%.

What this replaced

The correspondence is the Income Tax Department’s own, from its comparison utility for the 1961 and 2025 Acts. A renumbering is the easy half; whether the words changed is the half that decides cases.

25A - Special provision for arrears of rent and unrealised rent received subsequently

See the full 1961 to 2025 concordance.

What this page does not tell you. It does not reproduce the section. Everything above was written from the section’s own text as the Income Tax Department publishes it — the text is here, and nothing here is advice on your facts. Where a figure matters, read the sub-section it comes from.