Circular No. 355

1382. Whether, in a case where rent of residential house is pegged at certain level, rent actually received/receivable should be the basis for arriving at gross maintainable rent for the purposes of rule 1BB

What this is

Circular No. 355 was issued by the Central Board of Direct Taxes on 28 February 1983. Its subject is 1382. Whether, in a case where rent of residential house is pegged at certain level, rent actually received/receivable should be the basis for arriving at gross maintainable rent for the purposes of rule 1BB.

What it does

Says that where the rent of a residential house is pegged and cannot be raised, the rent actually received or receivable by the owner will ordinarily be the basis for the gross maintainable rent under rule 1BB of the Wealth-tax Rules, 1957, which from 1 April 1979 prescribes how a house used wholly or mainly for residence is to be valued.

Why it was issued

The Board was asked what the gross maintainable rent should be for a house whose rent is frozen at a level and cannot be increased.

Who it reaches

Owners of tenanted residential houses under rent control
Valuers and Wealth-tax Officers applying rule 1BB
Assessees whose net wealth includes let-out residential property

The instrument, as the Board published it

The words below are the department’s own, reproduced from its published text. Where the department’s copy carried a publisher’s notes after the instrument, those are not reproduced.

1382. Whether, in a case where rent of residential house is pegged at certain level, rent actually received/receivable should be the basis for arriving at gross maintainable rent for the purposes of rule 1BB
1. Rule 1BB of the Wealth-tax Rules, 1957 which has come into effect from April 1, 1979 prescribes the mode of valuing a house which is wholly or mainly used for residential purposes.
2. The Board has considered the question whether in a case where the rent of such a house is pegged at a level and cannot be increased, the rent actually received/receivable should be the basis arriving at the "gross maintainable rent" for the purpose of the rule.
3. It is hereby clarified that in such cases the rent actually received or receivable by the owner of the house would ordinarily be the basis for arriving at the gross maintainable rent.
Circular: No. 355 [F.No. 328/74/82-WT], dated 28-2-1983.

What to watch

This is a Wealth-tax circular, issued on a wealth-tax file, and it construes the Wealth-tax Rules, not the Income-tax Act.
The clarification is qualified by 'ordinarily', so it is a starting point rather than an absolute rule.
It applies to a house valued under rule 1BB, that is one wholly or mainly used for residential purposes, and the rule itself runs from 1 April 1979.
The relief depends on the rent being genuinely pegged and incapable of increase; that has to be shown.

Where you meet it

In a wealth-tax valuation dispute where the Wealth-tax Officer takes a notional or market rent rather than the frozen rent as the gross maintainable rent.

What it names

Rules it names. Rule 1BB of the Income-tax Rules, 1962. The 1962 Rules were replaced by the Income-tax Rules, 2026, which renumbered nearly everything: a rule number quoted here almost never means the same rule today.

← Circular No. 356 · Circular No. 353 →

A circular binds the department, not you and not a court. The Board issues a circular to its own officers. An assessee may hold the department to a circular that helps him; the department cannot hold an assessee to one that hurts him, and the Tribunal and the courts decide the law for themselves.

Source: the Income Tax Department’s own published text — its page for this instrument.