Union budget allowing to declare two houses as 'self-occupied' is a big tax relief, will boost rental housing, say experts

The announcement of zero income tax for individuals earning up to Rs 12 lakh annually is expected to strengthen housing demand and increase affordability for homebuyers.

Real Estate experts said that Union budget allowing homeowners to declare two houses as "self-occupied" property is the biggest tax relief and it will give further impetus to rental housing.

Union finance minister Nirmala Sitharaman announced in the Union Budget for 2025-26 that the threshold for tax-deducted at source (TDS) for income tax for rental income has been increased to Rs 6 lakh per year from the present Rs 2.40 lakh. The measure may come as a relief for those who own second homes and receive rental income on them, especially investor-owners, and can open up new rental housing.

Anuj Puri, chairman, ANAROCK Group, explained that investors can now claim “Nil valuation” for two self-occupied properties, instead of just one - a positive move for residential real estate investment.

“The simplified TDS on rent decreases the compliance burden and enhances liquidity for landlords and will positively impact the rental housing market, especially in metro cities. Previously, homeowners could claim only one self-occupied property as tax-free; now, they can claim two - thereby removing taxation on notional rental income from a second home,” he said.

He said this step minimizes tax pressures, promotes homeownership, and facilitates real estate investment, especially in second homes and Tier 2 and 3 cities. "Middle-class homebuyers, landlords, and investors can now benefit from reduced tax liabilities, better affordability, and less compliance hassles," he said.

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Puri added that by simplifying financial constraints and tax rules, the budget has made property ownership and rental housing more accessible. This gives a significant fillip to the real estate sector, specifically to and housing demand.

Until the 2018-19 financial year, the threshold on TDS for rent was Rs 1.8 lakhs per year, as per Section 194-I.

Abhilash Pillai, partner at law firm Cyril Amarchand Mangaldas, said that exempting rent up to Rs 6 lakh from TDS will greatly benefit tenants, who account for 40% of residential rentals.

"This will ease the financial burden on middle-class families, who often struggle with high rental costs and additional deductions. It will also encourage more investor-owners to rent out properties without tax concerns, boosting the residential real estate sector by improving supply and affordability," he said.

Push for housing demand

Sitharaman also announced income tax relief for the middle-class in the Union Budget 2025 on February 1. Real Estate experts said that the announcement of zero income tax for individuals earning up to Rs 12 lakh annually is expected to strengthen housing demand and increase affordability for homebuyers.

Pradeep Aggarwal, Founder & Chairman, Signature Global (India) Ltd, termed the income tax relief as “masterstroke” of direct tax reform and said that the exemption in income up to Rs 12 lakh will significantly boost disposable income, increasing affordability for homebuyers and driving real estate demand.

“Additionally, the government's thrust on PPP-driven infrastructure with a structured three-year project pipeline will accelerate urban expansion, unlocking new opportunities for real estate and housing,” he said.

Boman Irani, President, CREDAI National, said that exemption of income tax payable for income up to Rs 12 lakh, coupled with increasing the TDS threshold on rent from Rs 2.4 lakh to Rs 6 lakh, will significantly enhance disposable income, boosting housing demand and overall consumption.

Sandeep Chhillar, Founder and Chairman, Landmark Group, said that the reduction in the income tax slab has come as a great encouragement for first-time homebuyers.

Santosh Agarwal, CFO and Executive Director of Alphacorp said that the Union Budget 2025 takes a balanced approach towards economic growth and development.

“No income tax levied up to Rs 12 lakhs, under the new tax regime, would increase the disposable income for every individual, taking homebuyers closer to their dream of owning a house,” he said.