Finance Minister Nirmala Sitharaman in her Budget for 2025 offered tax relief to homeowners with two house properties.
“It is proposed to provide that the annual value of the property consisting of a house or any part thereof shall be taken as nil if the owner occupies it for his own residence or cannot actually occupy it due to any reason,” the Budget document said.
Currently, the yearly worth of two such properties may be viewed as ‘Nil’ if the homeowner lives there or in situations where she cannot stay due to employment in another location, for example. The 2025 budget has now aimed to eliminate the requirements necessary to consider the annual value as ‘Nil’.
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Reacting to the Budget 2025 proposals, Arvind Nandan, Managing Director, Research & Consulting, Savills India, said that by ensuring a more streamlined approach to taxation, the government has strengthened household purchasing power, potentially driving demand for both primary and secondary housing markets.
How Did the Previous Tax Rule Impact Homeowners?
Before Budget 2025, homeowners with two self-occupied properties faced a tax burden due to notional rent—a tax concept where the government assumes the second property could generate rental income, even if it wasn’t rented out.
Previous Tax Rules
- A homeowner could claim only one self-occupied property as “nil annual value” (exempt from tax).
- The second property was deemed to be rented out, and the owner had to pay tax on the notional rent (even if the house was vacant).
- An exemption was allowed only if the homeowner lived in another city for work, making it difficult for many to qualify.
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Impact on Homeowners
- Higher Tax Liability: Many people had to pay tax on a second home they weren’t earning rental income from.
- Inflexibility: Homeowners couldn’t enjoy tax benefits unless they met strict conditions, like working in a different city.
- Discouraged Property Ownership: The additional tax made it less attractive for middle-class families to invest in a second home.
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How Budget 2025 Changed This
Now, homeowners can claim both properties as self-occupied and pay no tax on either, regardless of their circumstances. This reform simplifies tax calculations, reduces financial strain, and encourages property investment.
“The new structure will substantially reduce the taxes of the middle class and leave more money in their hands, boosting household consumption, savings and investment,” Finance Minister Nirmala Sitharaman said in her Budget speech on February 1.
