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Union Budget lifts restrictions on claiming two properties as self-occupied
- A house owner could declare two properties as self-occupied for favourable taxation, but on condition that he or she can't occupy the properties due to employment or business in another place
In a significant move, the Union Budget 2025-26, unveiled by finance minister Nirmala Sitharaman, has proposed to lift restrictions on claiming two properties as self-occupied (SOP), streamlining the process for taxpayers.
The budget memorandum highlights an amendment to Section 23(2) of the Income Tax Act, which previously allowed owners to claim a property’s annual value as nil only if they occupied it for personal residence or could not occupy it due to employment, business, or profession elsewhere. This provision often led to confusion, with taxpayers questioned by the IT department about whether their reasons for not occupying the property were valid.
Prakash Hegde, a Bengaluru-based chartered accountant, noted that taxpayers were often asked to prove they were staying in rented accommodation in another city due to work commitments, even if their properties remained vacant.
“With a view to simplifying the provisions, it is proposed to amend the sub-section (2) so as 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 memorandum read.
Gautam Nayak, partner at CNK & Associates, welcomed the change, noting that it will streamline the rules and reduce compliance challenges.
SOP vs DLOP
The 2019-20 Budget allowed taxpayers to declare two properties as self-occupied (SOP), qualifying both for nil annual value. Prior to this, only one property could be claimed as SOP, with additional properties treated as deemed let-out property (DLOP), even if left vacant.
“The new rules will make it easier for the tax-payer to claim two properties as SOPs, even if he or she occupies them or is not able to occupy them for any reason, and also wherever they may be,” Hegde said. "This proposal benefits taxpayers by only requiring proof that the property is not let out, and not required to prove that the owner could not occupy it due to employment, business, or profession in a different location."
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Business NewsBudgetUnion Budget lifts restrictions on claiming two properties as self-occupied
First Published:1 Feb 2025, 05:49 PM IST
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