Actual rent means the rent for which the property is let out during the year. While computing actual rent, rent pertaining to vacancy period is not to be deducted. However, unrealized rent (*) is to be deducted from actual rent if conditions specified in this regard are satisfied.
(*) Unrealized rent is the rent of the property which the owner of the property could not recover from the tenant, i.e., rent not paid by the tenant. If following conditions are satisfied, then unrealized rent is to be deducted from actual rent of the year:
➣ The tenancy is bona fide.
➣ The defaulting tenant has vacated the property, or steps have been taken to compel
him to vacate the property.
➣ The defaulting tenant is not in occupation of any other property of the taxpayer.
➣ The taxpayer has taken all steps to recover such amount, including legal proceedings
or he satisfies the Assessing Officer that legal proceedings would be useless.
Source:- Income tax website.