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Tax Incentives for Homebuyers in Union Budget 2025

Submitted by admin on May 16th, 2025

“A home is not just an asset, but a symbol of financial stability. Budget 2025 just made owning more than one a little easier.”

The real estate and housing sector in India have received a breath of fresh air in the form of the Union Budget 2025. In what is a much-hailed announcement for middle-class/upper-middle-class homebuyers, Finance Minister Nirmala Sitharaman declared a significant tax reform. removal of conditions as regards owning two self-occupied houses without attracting tax implications.

What Was the Earlier Rule?

Prior to the passing of Budget 2025, taxpayers were only allowed to declare one property as self-occupied. If the taxpayer had a second house, even though it was not let out and was used by the family, such a house was assumed to be let out, and a notional rental income was added to the taxpayer’s income, making the taxpayer pay more tax.

This rule created a financial strain, particularly to people who had another home because of job transfers or expansive family size or having retired, even if they did not get any actual rental returns from the property.

What Has Changed?

The 2025 Budget has removed the clause on the deemed rental income for the second self-occupied home. This means:

• Now you have the liberty of owning two self occupied homes and make a declaration of both.
• There will be no notional rent added to your taxable revenue when it comes to the second house.
• This change will be effective from FY 2025-26 (Assessment Year 2026-27).

Impact on Homebuyers

This is a move that is likely to increase the disposable income for a majority of the tax payers since they will end up being taxed less thus lesser overall taxation. More importantly, it facilitates the increasing tendency of the people to invest in the purchase of the second home for their family, future-preparation, or the work-from-home purposes.

Additionally, this reform aligns with other tax benefits already available to home loan borrowers:

• Section 80C: Tax deduction up to ₹1.5 lakh on principal repayment.
• Section 24(b): Deduction up to ₹2 lakh on interest paid on home loan (for self-occupied properties).

With the ability to now claim benefits on two homes, taxpayers may become more open to investing in real estate assets beyond Tier-1 cities, especially in semi-urban or hometown locations.

Boost to the Real Estate Sector

Experts believe this step will revive housing demand, particularly in the affordable and mid-segment categories. Developers are likely to benefit from increased bookings for second homes, and this may reduce the unsold inventory in many urban and suburban regions.

Furthermore, the measure complements other Budget announcements such as:

• Continued focus on PMAY (Pradhan Mantri Awas Yojana).
• Development of smart cities and housing for all.

Conclusion

The 2025 Budget’s tax incentives are a strategic step toward housing inclusivity and wealth creation. By removing the tax penalty on the second self-occupied property, the government has not only addressed a long-pending demand but also encouraged Indians to invest more confidently in real estate.

For homebuyers, it’s now a good time to plan that second dream home.