Income Tax Liability on Arrears of rent received or outstanding rent received as per section 25 of the Income Tax Act 1961. Section 25B deals with the arrears of rent received in the current financial year of any previous years in the matter of house property. In which an Assesses is the owner of any property consisting of any building or land appurtenant there to which has been let out to the tenant and has received any amount, by way of arrears of rent from such property, which is not charged to income in any of the previous year will be charged to the income tax under the head of ‘Income from House-property’ it provides after the deducting thirty percent of the amount received as deduction.
Reference: – As Per Section 25B of the Income Tax Act 1961.
Special provision for arrears of rent received.
Where the assesses—
(a) Is the owner of any property consisting of any buildings or lands appurtenant thereto which has been let to a tenant; and
(b) Has received any amount, by way of arrears of rent from such property, not charged to income-tax for any previous year,
the amount so received, after deducting [a sum equal to thirty per cent of such amount], shall be deemed to be the income chargeable under the head “Income from house property” and accordingly charged to income-tax as the income of that previous year in which such rent is received, whether the assesses is the owner of that property in that year or not.
Case laws related to Income Tax on Arrears of rent received or outstanding rent received from House Property
S. 25B of IT Act, 1961—Income from house property—On the submission of the assessee, there was no need for the High Court to interpret s. 25B of the Act on the facts and circumstances of the case, the permission is granted to the assessee to move the High Court for recall/expungement of the observations pertaining to s. 25 if the High Court so deems it fit—Dowager Maharani Residential Accommodation welfare Amen. Trust vs. CIT.  230 CTR 18 (SC)