How Homeowners Can Claim Nil Tax on Two Self-Occupied Properties: Budget 2025

Finance Minister Nirmala Sitharaman’s Union Budget 2025 brings major relief for homeowners with multiple properties, easing tax burdens on second house ownership.

The Indian Budget 2025 has brought significant changes to the taxation laws concerning homeowners, particularly with regard to claiming nil tax on two self-occupied properties. This reform is aimed at relieving the tax burden for individuals who own multiple homes but do not earn rental income from them. This article provides a detailed, stepwise guide on how homeowners can claim Nil tax on their two self-occupied properties.

1. Understanding the Nil Tax Provision for Self-Occupied Properties

Before we dive into how to claim Nil tax on two self-occupied properties, it’s important to understand what the provision entails. Traditionally, under Indian tax laws, a taxpayer could claim tax exemptions on one self-occupied property under Section 23 of the Income Tax Act. If you owned more than one property, the second property would be deemed “let-out,” and the income from it would be taxed as rental income, even if no rent was earned. This resulted in an unfair tax burden for those who had multiple homes for personal use.

However, in Budget 2025, the government introduced a significant change: homeowners can now claim Nil tax on two self-occupied properties. The provision aims to treat both self-occupied properties equally, ensuring they are not taxed as “deemed let-out properties.” This means homeowners will not face a notional rent charge on the second home, thus easing their tax liability.

Additionally, if you are considering purchasing a home in Hyderabad, this reform can help alleviate the financial pressure on individuals with multiple properties. Alongside this, low interest home loans in Hyderabad are becoming more accessible, making homeownership easier for more people. With these new tax advantages, along with the availability of low interest home loans in Hyderabad, it’s a great time to explore your housing options.

2. Eligibility Criteria for Claiming Nil Tax on Two Self-Occupied Properties

To qualify for this tax relief, there are certain conditions that homeowners need to meet:

• Ownership of Two Properties: The taxpayer must own two properties, both of which are for personal use (self-occupied).
• No Rental Income: The properties must not be rented out. If any rental income is generated, the properties will no longer qualify as self-occupied for the purpose of this tax relief.
• Declaration of Properties: Both properties must be declared as self-occupied in the income tax return.

This provision is particularly beneficial for individuals who may have one property in their hometown and another for work, family, or other personal reasons.

3. Step-by-Step Process for Claiming Nil Tax on Two Self-Occupied Properties

Follow these simple steps to claim Nil tax on two self-occupied properties in your income tax return:

Step 1: Verify Property Ownership

Ensure that you are the sole owner or co-owner of both properties. Both properties must be classified as self-occupied under the Income Tax Act. If you’re renting out one property, it will no longer be considered self-occupied.

Step 2: Confirm Both Properties Are Used for Personal Use

Check that both properties are used for personal residential purposes. The properties should not be rented out or used for business purposes. Properties owned solely for investment and rented out will be subject to tax as “let-out” properties.

Step 3: Identify the Taxable Income

Since no rental income is being earned from the two properties, the income from both will not be subject to the notional rental tax, which was previously levied under Section 23. This means no tax is due on the properties, and homeowners can now claim the Nil tax benefit.

Step 4: File Your Income Tax Return

When filing your Income Tax Return (ITR), select the correct option for self-occupied properties under the “House Property” section. Both properties must be marked as self-occupied. Make sure that no income is shown under the “Income from House Property” for either of the two properties.

• For Property 1: Indicate it as “self-occupied” and show the rent as Nil.
• For Property 2: Similarly, mark it as “self-occupied” with rent as Nil.

Step 5: Submit the Required Documentation

While submitting your return, you will not need to provide any additional documentation unless specifically asked. However, it is advisable to keep records, including proof of ownership, address proof, and any other relevant documents to support your claims.

Step 6: Review and Verify Your Return

Before submitting your return, ensure that all details are correct. Check if both properties are listed as self-occupied and that the taxable rental income is nil. This will ensure that you benefit from the Nil tax provision.

Step 7: Consult a Tax Professional (If Needed)

If you have any doubts or complications regarding the filing of your ITR, it is recommended to consult a tax professional or a chartered accountant. They can provide guidance and ensure you are fully compliant with the new tax laws.

4. Advantages of the Nil Tax Provision for Homeowners

The introduction of Nil tax on two self-occupied properties offers several benefits to homeowners:

• Relief from Taxation: The new rule eliminates the notional tax on the second property, reducing the financial burden on homeowners who own more than one house.
• Simplified Filing Process: The filing process for homeowners with two self-occupied properties becomes simpler, as they no longer have to deal with the complexity of rental income calculations for the second property.
• Encouragement for Homeownership: This policy encourages individuals to buy homes without the fear of additional tax liabilities.

5. Conclusion

The Budget 2025’s Nil tax reform on two self-occupied properties eases the tax burden for homeowners with multiple properties. By following the outlined steps, homeowners can ensure zero tax liability. Additionally, low interest home loans in Hyderabad enhance affordability, making it a great time to expand property holdings.