Budget 2025: Relief on 2 self-occupied properties, without riders

Annual limit of Rs 2.4 lakh for TDS on rent increased to Rs 6 lakh

Finance Minister (FM) Nirmala Sitharaman has announced two changes related to property that will make life simpler and reduce compliance burden for property owners, tenants, and landlords. One, conditionalities attached to treating a property as self-occupied have been removed. Two, the government has increased the threshold limit for TDS (tax deduction at source) deduction on rent paid by non-individuals.

 

Conditions removed

 

Section 23 of the Income-Tax Act relates to determination of annual value. “Sub-section (2) of this section provides that where house property is in the occupation of the owner for the purposes of his residence or owner cannot actually occupy it due to his employment, business or profession carried on at any other place, in such cases, the annual value of such house property shall be taken to be nil,” says Rajarshi Dasgupta, executive director-tax, AQUILAW.

 

 

Further, sub-section (4) of the said section provides that provisions of sub-section (2) of the Act applies to two house properties only, which are specified by the owner.

 

Till now, taxpayers could claim the annual value (AV) of self-occupied properties as nil on fulfilling certain conditions. AV is the rent you receive on a property. When a property is self-occupied, its AV becomes nil.

 

Even earlier, two houses could be treated as self-occupied, provided the landlord fulfilled certain conditions. “Now, two houses can be treated as self-occupied with no questions asked, provided you have not let it out and earned any rental income on it,” says Deepesh Raghaw, Sebi-registered investment advisor. 

 

Under the existing rules, to claim a property where you do not reside as “self-occupied” can be problematic. The conditions can be difficult to meet and there is an element of subjectivity involved. “Your claim can also be challenged by tax authorities and possibly lead to litigation. In the worst case scenario, you may be required to pay tax on income from such a house even without earning from it,” says Raghaw.

 

This change will allow owners of multiple properties to breathe easier.

 

Annual limit for TDS on rent hiked

 

The FM has also increased the annual limit of Rs 2.4 lakh for TDS on rent to Rs 6 lakh. The section that has been changed is 1941, which applies to entities other than individuals and HUFs. “It applies to a situation where a non-individual, say a company, pays rent to an individual. It also applies when individuals who are liable to a tax audit, say, a professional who makes Rs 75 lakh per annum,” says Raghaw. Section 1941B, where an individual pays rent to another individual, remains unchanged, with the limit of Rs 50,000 remaining the same.

 

Experts say the limit of Rs 20,000 per month was too low.

 

A person paying Rs 20,000 as rent would not be a very big businessman. “For them, the burden of deducting TDS, depositing it, and so on, would have been onerous. Now, people who have the resources to meet the compliance burden will have to undertake it,” says Raghaw.

 

Anuj Puri, chairman of ANAROCK Group, points out that the simplified TDS on rent will enhance liquidity for landlords.

 

 “These changes provide simplicity, especially to retirees, who rely on interest and rental earnings for their post-retirement financial stability,” says Adhil Shetty, chief executive officer, BankBazaar. 

EASING NORMS

 

* Now, two houses can be treated as self-occupied, provided the homeowner has not let it out and earned any rental income on it

 

* Earlier, treatment as selfoccupied came with conditions, which have now been removed

 

* With the hike in TDS limit, rental payments of up to Rs 50,000 per month will not be liable for TDS