Second House Tax from 2026 — No More Deemed Rent
For decades, owning two houses meant paying tax on rent you never received. The Finance Act 2025 quietly ended that: you can now claim TWO self-occupied houses as nil. Here's the before-after math on a real Mumbai example.
What changed (Finance Act 2025, AY 2025-26 onwards)
The annual-value section (old Sec 23) now lets a taxpayer claim two houses as self-occupied with nil annual value — with no extra conditions attached. Suresh's Thane flat drops from ₹1,02,000 taxable to zero. No deemed rent, no notional maths, no conditions to satisfy.
| Situation | Old rule | New rule (2025-26+) |
|---|---|---|
| 1 house, self-occupied | Nil | Nil (unchanged) |
| 2 houses, both self-occupied | 2nd deemed let-out (tax on notional rent) | Both nil |
| 3+ houses | Any 1 nil, rest deemed let-out | Any 2 nil, rest deemed let-out |
| Actually rented out | Real rent taxable (30% + full interest) | Unchanged — real rent always taxable |
Conditions (short, but real)
- Genuinely self-occupied: you (or family) actually use it as a residence — or it sits vacant for genuine reasons like a job posting elsewhere. A flat secretly earning rent while claimed 'self-occupied' is misreporting, and the crackdown-era portal cross-checks rent receipts against owners.
- No rent received: even one month's rent in the year breaks self-occupied status for that house.
- Interest cap: home-loan interest on self-occupied houses is capped at ₹2,00,000 TOTAL across both houses (old regime). Let-out houses keep full interest deduction against rental income.
- New regime: no interest deduction for self-occupied property — but the nil annual value still applies, so no deemed-rent tax either.
Paperwork for 2026-27
In the ITR house-property schedule, mark both houses self-occupied (annual value nil) and split the interest within the ₹2L cap. If you quote section numbers on 2026-27 paperwork, use the 2025 Act mapped number for the annual-value section (old Sec 23) — the mapping page below has the full conversion.
By TaxSetu Editorial Team · Last reviewed: 7 October 2026
Based on the Income-tax Act 2025, Income Tax Rules 2026 and CBDT notifications; sections per the Income-tax Act 1961 (as amended) with 2025-Act mappings where notified · Verify on the official portal: incometax.gov.in
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Frequently Asked Questions
Two — from AY 2025-26, both can be claimed with nil annual value and no conditions. A third house is still deemed let-out.
Total — home-loan interest on self-occupied houses is capped at ₹2,00,000 across both houses combined (old regime).
Yes for annual value — no deemed-rent tax in either regime. But self-occupied interest deduction stays old-regime-only.
Then it is let-out, not self-occupied: real rent is taxable with 30% standard deduction plus full interest deduction.
Only one house could be self-occupied; the second was taxed on notional (imaginary) market rent even when empty.