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The recent Budget 2025 introduced sweeping changes to Income Tax affecting homebuyers which are sure to change the home buying experience in India. These changes take effect on April 1, and are meant to alleviate financial burden on homebuyers reducing tax obligations and increasing affordability. We outline the major amendments here, and look for ways they would benefit homebuyers.
Two Homes, One Tax Relief
One of the most important modifications is the provision that permits taxpayers to have two self-occupied houses without needing to pay tax under the 'income from house property' designation. In its clarification, the regime proposed that if a taxpayer does not occupy a house for purposes related to employment, business, or profession, the annual value of the house is to be treated as NIL. This will be of great relief to homebuyers looking to downsize or move from a single larger home and occupy two smaller homes. The Income Tax amendments impacting homebuyers in this manner allows for Section 54 exemption on capital gains, while receiving the benefit of a NIL annual value for both a former residence and new residence.
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Revised TDS Threshold for Rental Income
Another significant change in the new Budget is the revision of the TDS threshold on rental income. Earlier, TDS was applicable on rental payments in aggregate exceeding ₹2,40,000 in a year. The amendment proposes to reduce this threshold to ₹50,000 per month or part thereof. Suppose a landlord lets an office space for ₹45,000 per month; under the existing rules, TDS would have been deducted since the annual rental amount exceeds ₹2,40,000. However, with the proposed amendment, TDS will not apply as the monthly rental amount remains below ₹50,000 for TDS purposes. These Income Tax changes affecting homebuyers and landlords will likely make tax administration easier and provide relief.
Increased Tax Exemption for Salaried Individuals
Budget 2025 also wants to change the rules so that no tax will be imposed on income under ₹12 lakh. This means an employee with ₹12 lakh in taxable income could save about ₹80,000 more in taxes, all of which could go toward higher EMIs. Given the Income Tax rules' implications for homebuyers, if their taxes decreased that much, they may not have to change their monthly budgets much to buy a larger or more expensive house.
SWAMIH Fund-2: A Boost for Distressed Projects
In addition to tax relief measures for individuals, the government has initiated the SWAMIH Fund-2 to help revive distressed housing projects. The first SWAMIH fund allowed for the completion of 50,000 stalled projects and provided relief to homebuyers in financial distress paying between EMIs and rents. The government has proposed to complete another 40,000 units for the second fund in 2025. This initiative is one of the Income Tax changes that will affect homebuyers indirectly, as most middle-class or working-class families in India are held back by increased financial strain resulting from housing project deliveries and thus should allow for families to keep money in their bank account and reduce risk overall.
Conclusion
The modifications to Income Tax that will apply to home purchases on April 1, 2025, represent a significant change to the market for real estate - for the better. These changes will allow individuals to own two self-occupied properties without further taxation, revise the TDS threshold for owners receiving rent, raise tax exemptions available to salary', and set up a SWAMIH Fund-2. The hope is that these changes will help relieve some of the financial strains of home buying. These changes not only potentially make properties more affordable, however, they will also make the tax system more efficient and transparent overall, leading us to a stronger and more agile market for real estate. Be sure to take note of these upcoming changes and be on the lookout for the opportunities that arise from them.
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Ans 1. The reforms include dual home ownership relief (allowing two self-occupied houses with NIL annual value), a revised TDS threshold on rental income, higher tax exemption for salaried individuals, and the introduction of SWAMIH Fund-2.
Ans 2. Homeowners can now claim a NIL annual value on two self-occupied houses—benefiting those downsizing or transitioning between homes, and enabling them to secure Section 54 exemption on capital gains.
Ans 3. The revised rule sets the TDS threshold at ₹50,000 per month (or part thereof), meaning rental payments below this limit won’t attract TDS, simplifying tax administration for landlords.
Ans 4. Salaried taxpayers with taxable income under ₹12 lakh will pay no tax, potentially saving around ₹80,000 per year, which can help in managing higher EMIs.
Ans 5. The SWAMIH Fund-2 is designed to revive distressed housing projects by completing stalled units, thereby reducing financial stress on buyers and improving market stability.
Ans 6. Both new and existing homebuyers benefit—by reducing their tax burden and simplifying property-related expenses—while landlords gain from clearer rental income guidelines.
Ans 7. It’s advisable to review loan terms, consult tax professionals, and stay updated with official notifications to maximize the benefits of the new tax provisions.
Ans 8. While the reforms primarily ease financial strain on homebuyers, improved tax benefits could boost market confidence and potentially influence long-term property valuations.