Two Self-Occupied Properties

What is This Hack?

Budget 2024 allows two properties as self-occupied without notional rent tax from AY 2026-27, eliminating deemed income on second property

How It Works

Previously, if you owned two properties and both were self-occupied (not rented out), the second property was treated as "deemed to be let out" and you had to pay tax on notional rental income even though you earned nothing from it. Budget 2024 changed this: from AY 2026-27 (FY 2025-26 onwards), you can declare TWO properties as self-occupied without any notional rent taxation. This is especially beneficial for NRIs who own a property in India they use during visits, and one abroad, or for residents with homes in two cities. No more phantom income tax on a property you're not renting out. Applicable to both new and old tax regimes.

Step-by-Step Implementation

Verify Applicability

This benefit applies from Assessment Year 2026-27 onwards (i.e., returns filed in 2026 for income earned in FY 2025-26). If you're filing for earlier years, old rules apply (only one self-occupied allowed).

Identify Your Properties

List all residential properties you own. Decide which TWO you want to declare as self-occupied. These should be properties you actually use for living, not rental properties.

Document Self-Occupation

Maintain proof that you genuinely occupy these properties: utility bills, society maintenance receipts, voter ID/Aadhaar address, stay records. While not submitted with ITR, keep ready in case of scrutiny.

File ITR Declaring Both as Self-Occupied

In Schedule HP (House Property) of your ITR, mark both properties as "Self-Occupied" type. No notional rent will be computed. Deduct home loan interest (up to ₹2 lakh per property) if applicable.

If You Have 3+ Properties

If you own 3+ properties, you can only declare 2 as self-occupied. The third (and beyond) will still be deemed let out with notional rental income taxation.

NRI Special Case

NRIs can use this to declare one property in India (for personal use during visits) and one abroad as self-occupied, avoiding phantom tax on both.

Real Example: NRI with Two Properties

Situation

Anil (NRI in UK) owns a flat in Mumbai (annual notional rent: ₹8 lakh) and a flat in London. He uses the Mumbai flat during annual visits. Before Budget 2024, for returns till AY 2025-26.

Without This Hack

Old rule (one self-occupied): Mumbai flat declared "deemed let out". Notional income: ₹8L. After standard 30% deduction: Taxable income ₹5.6L. Tax (30% NRI rate): ₹1.68 lakhs annually on property he doesn't rent out!

With This Hack

New rule (two self-occupied) from AY 2026-27: Declare both Mumbai and London flats as self-occupied. No notional income on Mumbai flat. Tax: ZERO on phantom rental income. Only home loan interest (if any) can be deducted.

💰 ₹1.68 lakhs tax saved annually starting FY 2025-26

Common Pitfalls to Avoid

Benefit starts from AY 2026-27 only - not applicable for AY 2024-25 or 2025-26
Both properties must genuinely be self-occupied, not rented out
If you have 3+ properties, third onwards still deemed let out
Home loan interest deduction limited to ₹2 lakh per self-occupied property
Selling within 5 years of claiming home loan deduction can reverse benefits
Notional rent calculation uses municipal value or fair rent, whichever is higher