Two Self-Occupied Properties
Two self-occupied houses have been allowed since AY 2020-21, not by Budget 2024
overview
What is this hack?
This is widely reported as a Budget 2024 change effective AY 2026-27. It is neither. The Finance Act 2019 substituted "two houses" for "one house" in Section 23(4) with effect from AY 2020-21, so a second self-occupied house has carried nil annual value — and no notional rent — since then. The Finance Act 2025 change, effective AY 2025-26, was narrower: it removed the Section 23(2) requirement that you be living elsewhere for employment, business or profession before a house you do not occupy can qualify.
how it works
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. That has not been the position for years: the Finance Act 2019 substituted "two houses" for "one house" in Section 23(4) with effect from AY 2020-21, so two houses have been treatable as self-occupied since then. What the Finance Act 2025 did, from AY 2025-26, was drop the Section 23(2) condition that a house you do not live in only qualifies if you have to live elsewhere for employment, business or profession — the annual value is now nil if you cannot actually occupy it for ANY reason. This is useful for anyone with homes in two cities, and for an NRI with a house in India kept for visits. It does nothing for an NRI's overseas house, which is outside the Indian tax net altogether under Section 5(2). No more phantom income tax on a property you're not renting out. Applicable to both new and old tax regimes.
steps
Step-by-step guide
Verify Applicability
Two houses have been treatable as self-occupied since Assessment Year 2020-21 under Section 23(4); only for AY 2019-20 and earlier was a single house the limit. The separate Finance Act 2025 relaxation of the Section 23(2) condition applies from Assessment Year 2025-26.
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, but the ₹2 lakh ceiling in the provisos to Section 24(b) is an AGGREGATE across all your self-occupied houses, not ₹2 lakh per house — and Section 115BAC(2)(i) denies the deduction altogether under the new (default) regime.
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.
- 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 is capped at ₹2 lakh in AGGREGATE across all self-occupied houses (not ₹2 lakh each), and is not available at all under the new (default) regime
- Selling the house within 5 years from the end of the financial year in which you took possession reverses the Section 80C deduction claimed for principal repayment — the earlier deductions are taxed as income of the year of sale (Section 80C(5)(iii)). The Section 24(b) interest deduction is not clawed back
- Notional rent calculation uses municipal value or fair rent, whichever is higher
- Own two or more residential properties
- Properties are actually self-occupied (not rented)
- Filing ITR for AY 2020-21 or later years (that is when Section 23(4) moved from one house to two)
- Proof of self-occupation (utility bills, etc.) for potential scrutiny
- Properties should be in your name or co-owned
- Applicable to both residents and NRIs
- Potential savings: Tax on one house's notional rent
- Implementation time: Immediate
- Legal status: fully legal
- Risk level: low
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open →Need help implementing this hack?
Get expert guidance from CA Ashama Rajawat on implementing this strategy correctly for your specific situation.