The Union Budget 2025 has introduced several significant changes that bring good news for homeowners and prospective homebuyers. These amendments, which will take effect from April 1, 2025, aim to ease the financial burden on property owners while encouraging real estate investments. Here’s a look at the key highlights and their impact.
1. Tax Relief for Two Self-Occupied Homes
Under the existing tax laws, the annual value of a self-occupied property is considered NIL, meaning homeowners do not need to pay tax on such properties. However, if they owned a second house, they were taxed on the second property’s notional rental income, even if they did not rent it out.
What’s new?
From April 1, 2025, homeowners can own two self-occupied properties without any additional income tax liability under the “Income from House Property” category. This amendment benefits individuals who, for professional or personal reasons, own multiple homes.
For instance, if a family decides to sell a large house and buy two smaller homes due to joint family nuclearization, they can now claim Section 54 exemption on capital gains and also enjoy NIL annual value tax benefits for both properties.
2. Higher TDS Threshold on Rent Payments
The government has proposed an amendment to Section 194-I of the Income-tax Act, 1961, which regulates Tax Deducted at Source (TDS) on rental payments.
Current Law:
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Any entity (except individuals and Hindu Undivided Families) paying rent exceeding ₹2,40,000 per year must deduct TDS at 10%.
Proposed Change (Effective April 1, 2025):
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The new TDS threshold is ₹50,000 per month (₹6,00,000 annually).
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If rent is below ₹50,000 per month, TDS will not apply.
Example:
A business renting an office for ₹45,000 per month currently pays ₹54,000 in TDS annually. Under the new rule, since the rent is below ₹50,000 per month, no TDS will be applicable from April 1, 2025.
This revision reduces compliance burdens for businesses and encourages landlords to lease their properties more freely.
3. No Tax Up to ₹12 Lakh Income – Boost for Homebuyers
A major relief in Budget 2025 is the increase in the income tax exemption limit to ₹12 lakh under the new tax regime. This will lead to significant tax savings for salaried individuals and boost their home-buying capacity.
Impact on Home Affordability:
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Tax savings: ₹80,000 per year.
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Extra EMI affordability: ₹6,600 per month.
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Increased loan eligibility: A person earning ₹12 lakh can now afford a property worth ₹52-58 lakh (compared to ₹45-50 lakh earlier).
With the RBI reducing interest rates by 25 basis points, housing loans are expected to become more affordable, further supporting homebuyers.
4. SWAMIH Fund-2: Relief for Stalled Housing Projects
The government has launched SWAMIH Fund-2 to complete 40,000 more stalled housing projects in 2025, benefiting homebuyers stuck with incomplete properties.
SWAMIH Fund-1 had earlier completed 50,000 stalled projects, providing relief to thousands of buyers who were forced to pay both rent and EMIs for unfinished homes.
Who Benefits?
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Middle-class homebuyers waiting for project completion.
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Investors looking for safer real estate options.
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The overall real estate sector, as more liquidity flows in.
Final Thoughts
The Budget 2025 brings a positive outlook for homebuyers and homeowners by easing tax burdens, increasing loan affordability, and addressing stalled projects. These changes are expected to boost real estate investments and home ownership in India.