Union Budget 2025: Now Claim Two Self-Occupied Homes as Tax-Free
In a significant move to promote homeownership and ease the tax burden on middle-class families, Finance Minister Nirmala Sitharaman announced a major tax reform in the Union Budget 2025. Taxpayers can now claim the annual value of two self-occupied properties as zero, replacing the previous rule that allowed this benefit for only one self-occupied property. Under the old rule, additional properties were taxed based on deemed rental income, even if they were not rented out, creating a financial strain for many property owners.

Union Budget 2025 allows taxpayers to claim two self-occupied properties as tax-free, offering big relief to middle-class homeowners.
This new rule means that individuals who own more than one home will no longer have to pay taxes on the notional rental income from their second property. Instead, both properties can now be claimed as self-occupied, providing substantial relief to taxpayers who previously faced tax liabilities on their second home’s assumed rental value. This change is particularly beneficial for middle-income homeowners, reducing the financial stress associated with owning multiple properties.
“Previously, taxpayers were only allowed to claim the annual value of one self-occupied property as zero, while any additional properties were taxed based on deemed rental income,” explained Sandeep Chilana, Managing Partner at CCLaw. “The recent change, announced in Budget 2025, allows taxpayers to claim the annual value of two self-occupied properties as zero. This amendment offers significant tax relief, reduces compliance burdens, and encourages homeownership by making it more affordable for middle-class families. It reflects a more progressive approach in accommodating the diverse needs of property owners.”
Ankit Jain, Partner at Ved Jain & Associates, provided further clarification: “Previously, an individual could claim up to two properties as ‘self-occupied’ if they were either residing in them or unable to do so due to employment or business requirements in another location. In such cases, the deemed rental value of these properties was considered nil, and no notional income was added to the owner’s taxable income.”
However, the latest budget has simplified these conditions by removing the requirement of employment or business in another location. Now, individuals can claim any two properties as self-occupied, regardless of their circumstances. This ensures that no notional rental income is imputed for these properties, providing greater flexibility and tax relief for property owners.
This revision not only benefits the middle class but also offers significant relief to high-net-worth individuals (HNIs). Many people own multiple properties that cannot be rented out due to various constraints such as family usage, legal issues, or unfavorable market conditions. The new rule accommodates these situations, ensuring that property owners are not unfairly taxed on properties that do not generate rental income.
Key Benefits of the New Amendment:
- Tax Relief for Homeowners: Homeowners with more than one self-occupied property can now claim both properties as self-occupied, eliminating the notional tax burden. This creates substantial savings and makes owning multiple homes more financially feasible, especially for the middle class.
- Encouragement for Homeownership: The change encourages people to invest in homes without the fear of additional tax liabilities on non-rented properties. Families who have invested in second homes for personal use or investment purposes can now enjoy their properties without worrying about taxes on notional rental income.
- Increased Financial Flexibility: By reducing tax liabilities, homeowners will have more disposable income. These funds can be utilized for other essential needs such as education, healthcare, or retirement savings, boosting household consumption and overall well-being.
- Simplified Tax Compliance: The removal of complex conditions related to employment or business requirements simplifies the tax process. Property owners no longer need to provide additional documentation to justify their claims, reducing administrative burdens and compliance costs.
- Support for Property Investment: This reform is likely to stimulate the real estate market, encouraging more people to invest in property. It provides confidence to potential buyers that owning multiple properties will not result in disproportionate tax burdens, potentially driving growth in the housing sector.
In conclusion, the Union Budget 2025 introduces a taxpayer-friendly amendment that reflects a progressive approach to personal income tax. By allowing individuals to claim two self-occupied properties as tax-free, the government has provided much-needed relief to homeowners, encouraged property investment, and simplified tax compliance, all while supporting the broader goal of promoting homeownership across India.
Disclaimer: The information provided in this article is for general informational purposes only. It is not intended as financial or legal advice. Please consult your financial advisor before making any decisions.
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