Income from house property calculation for AY 2025-26: Claim nil value for 2 self-occupied flats, check FAQs

In Union Budget 2025, Finance Minister Nirmala Sitharaman proposed to simplify the taxation of self-occupied properties from FY 2024-25, i.e. assessment year 2025-26 onwards.

The new rule will help taxpayers having two self-occupied flats or houses in calculating income from house property for taxation purposes.

The finance minister has proposed to relax the conditions provided in Section 23 (2) of the Income-tax Act, 1961 for determining the annual value of a self-occupied property as “Nil”.

"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 documents said.

Let's understand what this means through some FAQs.

What was the previous rule?

The annual value of a self-occupied property was taken as nil if it was occupied by the owner for his residence or if he could not reside in it because of business, profession, or employment.

What is the new rule?

Now the annual value of a self-occupied property can be taken as nil irrespective of whether it is occupied by the owner for his residence or if he cannot occupy it due to any reason.

If you are not residing in your self-occupied property, you can take its annual value as nil without satisfying the additional condition of being unable to reside in it due to business, employment, or profession.

Why is the new rule important for taxpayers?

A taxpayer can take the annual value as nil for a maximum of two self-occupied properties.

As per income-tax rules, the annual value of a house property can be taken as nil for taxation purposes only if no rent or any other benefit is derived from such property. However, this benefit is available only for two properties owned by a taxpayer.

Previously, taxpayers faced difficulties when claiming the annual value of a self-occupied property as nil, especially if they were not residing in it and not earning any rent.

If a taxpayer has three properties, s/he can choose two out of the three houses for taking the annual value as nil as per section 23(2) of the Income-tax Act, 1961.