Income tax rules for house property simplified in Budget 2025: How it will benefit taxpayers with 2 houses

Feb 1, 2025

Synopsis
The simplification of rules will help taxpayers easily file their income tax returns without any calculation as they can claim the value of any two houses as zero. The deemed calculation of house will apply only if the taxpayer has a third house.

Finance Minister Nirmala Sitharaman announced in Budget 2025 the relaxation of conditions for making any two houses self-occupied properties in income tax rules. As per the announcement made in the Budget 2025 speech, “Presently tax-payers can claim the annual value of self-occupied properties as nil only on the fulfilment of certain conditions. Considering the difficulties faced by taxpayers, it is proposed to allow the benefit of two such self-occupied properties without any condition.”

The simplification of rules will help taxpayers easily file their income tax returns without any calculation as they can claim the value of any two houses as zero. The deemed calculation of house will apply only if the taxpayer has a third house.

Here is an example to understand this. Suppose a taxpayer has two houses where one is occupied by him and the other is lying vacant. As per the proposals made in Budget 2025, the taxpayer can easily claim both houses as self-occupied and will not be required to pay any tax.

On the other hand, if an individual has three houses, then he/she can easily claim any two houses as self-occupied. The deemed value will be calculated for the third house.

Current income tax rules to claim house as self-occupied

As per the current income tax rules, a taxpayer is required to fulfil the following condition to claim two houses as self-occupied property:

“cannot actually be occupied by the owner by reason of the fact that owing to his employment, business or profession carried on at any other place, he has to reside at that other place in a building not belonging to him.”

Here is an example to understand current income tax rules. A taxpayer having two properties in Delhi and living in Mumbai for employment purposes can claim both the Delhi houses as self-occupied provided he is not owning any property in Mumbai.

However, in the future, if the taxpayer buys a house in Mumbai, then he can easily claim any two houses as self-occupied property as there is no condition to claim any two houses as self-occupied. This is because Budget 2025 proposes to remove this condition.

[The Economic Times]