Homeowners get income tax relief on second house in Budget 2025

The budget has proposed a pivotal change for property owners, allowing them tax exemption for two self-occupied properties, instead of one. They will be able to claim nil annual value for the second property if it is self-occupied, without conditions. This reform eliminates the earlier requirement of stringent conditions for claiming the second property as self-occupied, simplifying tax compliance and offering greater financial flexibility.

The move is expected to stimulate investment in residential real estate. "The ability to claim nil valuation for two properties removes the burden of taxation on notional rental income for a second home," said Anuj Puri, chairman of Anarock Group. "This will boost home ownership and encourage investment in both primary and secondary housing markets."

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From a compliance perspective, the relaxation is significant, said Ravi Shankar Singh, MD of residential transaction services at Colliers India.

"Earlier, taxpayers had to justify the non-occupation of a second property, typically tied to employment or business reasons," he said. "Removing this requirement significantly reduces compliance hassles."

Delhi-based chartered accountant Manoj Pahwa explained the practical benefits of the move.

"This amendment, aligning with provisions under Section 23(2) of the Income-tax Act, significantly benefits homeowners even if they are not physically living in the house," he said. "The elimination of proof requirements for relocation due to work is a major relief."

It simplifies tax management for property owners juggling professional commitments across cities.

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The reform will promote ownership for vacation homes or secondary residences as well.

"The previous taxation on deemed rental income made owning a second home less attractive," said Sandeep Ahuja, CEO of Atmosphere Living. "With this update, taxpayers can enjoy their holiday homes without the financial penalty, making such investments more appealing."

The budget has addressed the issue of deemed rental income, a long-debated burden. It has offered relief to homeowners who don't rent out their properties. This change is going to enhance affordability for homebuyers, support the rental housing market, and drive demand in tier 2 and tier 3 cities, analysts said.