Budget 2025: Sitharaman Announces ‘Nil Valuation’ For Self-Occupied Properties, Increases TDS Limit To Rs 6 lakh For Rental Income

Union Minister of Finance Nirmala Sitharaman announced relief for homeowners of two houses in her Budget Speech in Parliament on February 1, 2025. Tax liability of two self-occupied houses will now fall nil for the purpose of tax. Earlier, this was allowed on only one self-occupied house.

“It is proposed to provide that the annual value of the property consisting of a house or any part thereof shall be taken as nil if the owner occupies it for his own residence or cannot actually occupy it due to any reason,” the Budget document said.

This announcement has simplified the annual value taxation of self-occupied property.

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Additionally, she also increased the tax deduction at source (TDS) limit on rental income from Rs 2.40 lakh to Rs 6 lakh. This move omits the tax burden on ‘notional rental income’ generated from a second home.

B. Jagannath Rao, general secretary, Credai says: “Although this change aims to stimulate the ‘second home’ market, it risks exacerbating existing inequalities. Wealthier individuals with the means to purchase multiple properties may benefit disproportionately, potentially leading to speculative buying and driving up property prices. Additionally, this could divert investment away from affordable housing initiatives that are crucial in tier-II and tier-III cities.

“By acknowledging the diverse housing needs of families, this decision not only provides greater tax relief, but also encourages real estate investment. The move aligns with the government’s broader focus on financial empowerment and ease of living, strengthening the middle class, while simplifying the tax structure,” Rao adds.

Kaushal Agarwal, co-founder and director, Guardians Real Estate Advisory says: “Earlier, individuals had to pay tax on the notional rental income of a second home, adding to their financial burden. This change simplifies tax compliance and recognises the need for housing flexibility, especially for families with homes in different cities for work, investment, or personal reasons. By reducing tax liabilities, this move is expected to boost homeownership and drive real estate demand, particularly in tier-II and tier-III cities. The budget also simplifies TDS rules on rental income, reducing compliance hassles for landlords and improving cash flow in the rental housing market.”

He adds: “The National Geospatial Mission will enhance urban planning, and raise the TDS threshold on rent to Rs 6 lakh eases compliance for small landlords. Additionally, the increased tax exemption of up to Rs 12 lakh provides aspiring homebuyers with greater financial flexibility. These reforms make homeownership more accessible, encourage real estate investment, and strengthen India’s urban infrastructure.”