The Union Budget 2025 has delivered a significant boost for property owners by introducing a new tax exemption policy for self-occupied properties. Taxpayers can now claim exemptions on not just one but two self-occupied properties, marking a pivotal shift in tax regulations and offering much-needed financial relief to millions of homeowners across the country.
How the New Tax Exemption Works
Under the previous tax regime, only one self-occupied property could be declared tax-exempt, while a second property, even if self-occupied, was treated as “deemed to be let out” and taxed on its notional rental income. This policy often placed an additional financial burden on individuals maintaining multiple residences for professional or personal reasons.
The new policy removes this restriction, allowing taxpayers to declare both self-occupied properties as having a “nil annual value,” effectively eliminating any tax liability on notional rental income. This simplification is expected to benefit those who own homes in multiple locations, such as a primary residence in their hometown and another property near their workplace.
Benefits for Homeowners
- Financial Relief: Homeowners can now save significantly by avoiding taxes on deemed rental income for a second self-occupied property.
- Increased Flexibility: Families can maintain homes in multiple cities without the worry of additional tax implications.
- Simplified Compliance: The removal of conditions for claiming the second exemption makes tax filing more straightforward and hassle-free.
Property Ownership Trends in Key Cities
The policy is expected to impact homeowners in metropolitan regions the most, where dual property ownership is common. Here are some key statistics:
- Gurgaon and Delhi NCR: Gurgaon alone hosts approximately 300,000 homeowners, while Delhi NCR collectively accounts for over 1.5 million homeowners. Many of these individuals manage two properties—one close to their workplace and another in suburban or rural areas.
- Mumbai: As India’s financial capital, Mumbai has over 2.1 million homeowners. High property prices often prompt families to invest in secondary homes in nearby areas such as Navi Mumbai or Thane.
- Bengaluru: Known for its IT hubs, Bengaluru is home to around 1.2 million homeowners, with many professionals owning properties both within the city and in their hometowns.
This change will alleviate financial pressures on such homeowners, encouraging more investments in residential properties.
Real Estate Sector Set to Flourish
The revised tax policy is poised to have a ripple effect on the real estate market:
- Increased Demand for Homes: The financial relief may incentivize individuals to purchase a second home, whether for personal use or as an investment.
- Growth in Tier-2 and Tier-3 Cities: Many families may now explore buying homes in smaller cities, boosting regional real estate markets.
- Stimulus for Developers: Higher demand could lead to new projects, particularly in affordable and mid-segment housing categories.
- Economic Impact: The surge in real estate activity is expected to generate jobs and stimulate industries such as construction and building materials, contributing to overall economic growth.
The Budget 2025 provision for tax exemptions on two self-occupied properties is a game-changer for homeowners and the real estate sector alike. By alleviating tax burdens and promoting homeownership, the government has laid the groundwork for robust growth in housing markets and greater economic activity. This progressive measure is set to benefit individuals and foster a more dynamic and inclusive real estate landscape.
