What is Vacancy Allowance and Unrealized Rent?
Any let out property remaining vacant for a part of the year is entitled to vacancy allowance. When it is vacant for some time of the year, a proportionate value which is proportionate to the period for which the property is unoccupied is deducted from the annual value as vacancy allowance. If the property remains vacant throughout the year, no vacancy allowance will be available.
Sometimes, the landlord is not able to collect his rental dues from the tenant. Then it is known as unrealized rent. This amount has to be deducted from the annual value, i.e. adjustment has to be made in the annual value: It has to be proved lost and irrecoverable. The conditions are that the tenancy must be bonafide, the defaulting tenant must have vacated or about to vacate the property, he must not be in possession of any other property of the landlord and the assessee must satisfy the Assessing officer that all reasonable steps have been taken to recover the rent and legal methods have not succeeded.