Relaxation of Deemed Let-Out Property Provision under the Finance Bill 2025

Tax Amendments

Here’s a detailed summary of the relaxation of deemed let-out property provisions under the Finance Bill 2025, including key changes, tax implications, and practical examples:

Table of Contents

1. Key Changes in Deemed Let-Out Property Rules (Effective April 1, 2025)

Removal of Occupation Conditions: Previously, taxpayers could claim two properties as self-occupiedonly if they couldn’t occupy the second property due to employment, business, or profession This condition has been removed .
Simplified Declaration: Now, taxpayers can declare any two properties as self-occupied(with nil annual value) regardless of the reason for non-occupation (e.g., vacation home, family use, or personal preference) .
Third Property Rule Unchanged: Properties beyond the first two will still be deemed let-out, and notional rent will apply .

2. Tax Implications

SCENARIO	PRE-2025 TREATMENT	POST-2025 TREATMENT
Two Self-Occupied Properties	One tax-free; second taxed if not meeting employment/business conditions	Both tax-free (nil annual value)
Three or More Properties	Two tax-free (if conditions met); others deemed let-out	Two tax-free; third deemed let-out

Example:

Aowns three houses (Delhi, Mumbai, Goa).
- Pre-2025: Only Delhi (self-occupied) and Mumbai (if work-related) could be tax-free. Goa deemed let-out.
- Post-2025: Delhi and Mumbaican be declared tax-free; Goa deemed let-out .

3. Key Benefits

Reduced Compliance Burden: No need to prove employment/business reasons for non-occupation .
Boost to Real Estate: Encourages investment in secondary/vacation homesby eliminating notional rent tax .
Simplified Filing: Taxpayers no longer need to calculate or report deemed rental income for two properties .

4. Practical Impact

Homeowners: Save taxes on second properties (e.g., ₹4.8 lakh notional rent no longer taxed for a ₹40K/month property) .
Investors: Makes owning multiple properties more attractive, especially in tier 2/3 cities.
Professionals: Eases tax burdens for those with properties in multiple cities (no relocation proof needed) .