From the assessment year 2025 to 2026, you can treat up to two self occupied houses as having a nil annual value, which means no notional rent is taxed on them, and you no longer have to prove that you live away from the second house because of your job. Any reason for not occupying it now qualifies.
Quick answer: The Finance Act 2025 amended Section 23(2) of the Income Tax Act so that a house has nil annual value if the owner occupies it or cannot actually occupy it for any reason. You can still claim this for a maximum of two houses. Earlier the second, unoccupied house qualified only if you lived elsewhere for work or business. From AY 2025-26 that condition is gone, so a second house kept empty for any reason is nil, not deemed let out.
Take a person who owns two flats, lives in one, and keeps the second in another city empty for family use, not for a job posting. See how the tax on the second flat moves.
| Item | Before AY 2025-26 | From AY 2025-26 |
|---|---|---|
| First house, self occupied | Nil annual value | Nil annual value |
| Second house kept empty for a non work reason | Deemed let out, notional rent taxed | Nil annual value |
| Condition to be met for the second house | Must be vacant due to employment or business elsewhere | Any reason accepted |
Before the change, if your reason for the empty second house was not a job or business posting, the law treated it as deemed let out and taxed a notional rent on it. Now the second house is simply nil, within the two house limit.
Two things are worth separating, so you frame this correctly.
This applies from 1 April 2025, that is, from the assessment year 2025 to 2026.
The relief is generous but bounded. Keep the cap in mind.
You apply this in the house property schedule of your income tax return.
If you are weighing the old and new tax regimes, read the Section 87A rebate under the new regime. To frame a written query to the tax department, The RTI Playbook is a useful companion.
Real-life example. Kashvi Pathak owns a flat in Pune where she lives and a small flat in her home town that she keeps for visits, not for any job posting. Until AY 2024-25, because her reason was not employment elsewhere, the home town flat was deemed let out and a notional rent was added to her income, raising her tax. From AY 2025-26 she claims both flats as self occupied with nil annual value, so the notional rent disappears. She still claims the home loan interest on the home town flat within the allowed limit.
Up to two. You choose which two of your own use houses are treated as nil annual value. Any house beyond two is deemed let out and taxed on a notional rent.
The Finance Act 2025 amended Section 23(2) so a house is nil value if the owner occupies it or cannot actually occupy it for any reason. Earlier the second house qualified only if you lived elsewhere for work or business.
From the assessment year 2025 to 2026, that is, income earned in the financial year 2024 to 2025 onward, following the Finance Act 2025.
The two house benefit has existed since AY 2020-21. What changed in 2025 is that the second house no longer needs an employment or business reason to be treated as nil. Any reason now qualifies.
Two can be treated as nil annual value. The third is deemed let out, and a notional rent, reduced by the standard deduction, is added to your income.
Yes. A self occupied house has nil annual value, but you can still claim the home loan interest deduction on it up to the limit allowed for self occupied property.
The nil annual value treatment for two self occupied houses applies in computing house property income. How much it helps depends on your overall regime choice and deductions, so compare both regimes before you file.
When you own more houses for your own use than the law allows to be nil, the extra houses are treated as if let out, and a notional or expected rent is taxed on them even if no rent is actually received.