The term “rent actually received or receivable” is used in the context of income tax to determine the taxable income from a rental property. This term is important because it determines the amount of rent that is subject to tax, as well as the amount of deductions that can be claimed against that rent.
Actual Rent Received
Actual rent received is the amount of money that a taxpayer has actually received from a tenant for the rental of a property. This includes any advance rent that has been paid, as well as any security deposits that are held by the taxpayer.
Rent Receivable
Rent receivable is the amount of money that a taxpayer is entitled to receive from a tenant for the rental of a property, even if it has not yet been paid. This includes any rent that is due but has not yet been paid, as well as any rent that is accrued but has not yet been due.
Gross Annual Value
The gross annual value (GAV) of a property is the notional rent that the property could be expected to fetch if it were let out at its full rental potential. This is an important concept for income tax purposes because it is used to determine the maximum amount of rent that can be received from a property without it being considered taxable income.
Taxable Income from Rental Property
The taxable income from a rental property is the difference between the GAV of the property and the deductions that are allowed against that rent. Deductions that can be claimed against rental property income include:
- Municipal taxes paid on the property
- Interest on a loan taken out to purchase the property
- Repairs and maintenance costs
- Standard deduction of 30% of the net annual value of the property
Example
Suppose a taxpayer owns a property that has a GAV of Rs. 100,000. The taxpayer receives Rs. 80,000 in rent from the property and pays Rs. 10,000 in municipal taxes. The taxpayer also claims the standard deduction of 30% of the net annual value of the property, which is Rs. 27,000. The taxpayer’s taxable income from the rental property is Rs. 23,000.