Self-Occupied Properties in Budget 2025-26 The government in its continuous effort to simplify tax laws and reduce compliance burdens, has introduced
Self-Occupied Properties in Budget 2025-26
The government in its continuous effort to simplify tax laws and reduce compliance burdens, has introduced an important amendment to Section 23 of the Income Tax Act. This amendment, proposed in the Union Budget 2025-26, aims to make the determination of the annual value of self-occupied house properties more straightforward.
With this amendment, property owners can now enjoy a more seamless tax filing experience while benefiting from clearer and simpler regulations.
Understanding the Existing Provisions
Under the current provisions of Section 23(2) of the Income Tax Act:- If an individual owns a house property and occupies it for self-residence, the annual value of such property is taken as nil.
- If an individual cannot occupy the house due to employment, business, or professional commitments requiring relocation, the annual value is also taken as nil.
- However, this benefit is restricted to two house properties as per Section 23(4). The taxpayer must specify which two properties they wish to claim under this provision.
Proposed Amendment in Budget 2025-26
To further simplify these provisions, the government has proposed a revision to Section 23(2), which states:- The annual value of a property consisting of a house or any part thereof shall be taken as nil if the owner occupies it for self-residence or cannot actually occupy it due to any reason.
- The restriction under Section 23(4) remains unchanged, meaning the benefit is still limited to two-house properties.
Impact of the Amendment
This change simplifies the determination of annual value by removing the need for specific conditions related to employment or business relocation. Now, any self-occupied house, irrespective of the reason for non-occupation, can avail of the nil annual value provision, subject to the two-house property limit.Key Benefits of the Amendment
- Simplified Compliance: Taxpayers no longer need to prove employment or business-related relocation to avail of the benefit. Any reason for non-occupation is now sufficient.
- Reduced Documentation: Since the requirement of proving employment/business relocation is removed, the compliance burden is significantly reduced.
- Continued Flexibility: The provision allowing taxpayers to select two properties for this benefit remains unchanged, maintaining flexibility in tax planning.
- Taxpayer-Friendly Approach: The change aligns with the government’s objective of making tax laws simpler and more taxpayer-friendly.
Example Scenarios
Scenario Before the Amendment:
- Mr. Sharma owns two flats in Mumbai, one for self-use and another which remains vacant due to his job transfer to Bangalore.
- Under the existing law, the second house’s annual value is considered nil only because his relocation was due to employment.
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He might not have qualified for this benefit if he had relocated for personal reasons (e.g., staying with family in another city).
Scenario After the Amendment:
- Under the revised provision, any reason for non-occupation is acceptable.
- This means that even if Mr Sharma relocates for personal reasons, he can still claim nil annual value for his second house (subject to the two-property limit).
Implementation Timeline
The amendment is set to take effect from April 1, 2025, and will apply to Assessment Year 2025-26 onwards.Conclusion
The simplification of the annual value determination for self-occupied properties is a significant step toward reducing the compliance burden for homeowners. By eliminating the need to justify non-occupation due to employment or business, the government has made tax compliance easier and more accessible. However, taxpayers should still be mindful of the two-property limit under Section 23(4) while claiming the nil annual value benefit.With this amendment, property owners can now enjoy a more seamless tax filing experience while benefiting from clearer and simpler regulations.
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