With effect from April 1, 2025, the Indian government’s most recent income tax reforms are expected to have a big effect on homebuyers and the real estate market. It is expected that major changes, including an increased tax exemption limit, a new threshold of rental income TDS, and tax benefits on multiple self-occupied houses, will enhance affordability, boost investment, and enhance market sentiment.
The raising of the income tax exemption from ₹7 lakh to ₹12 lakh will probably have the biggest impact. For individuals earning up to ₹12 lakh per year, this step effectively exempts them from paying taxes, leaving them with more money and lower housing expenses. The introduction of a ₹75,000 standard deduction for salaried taxpayers also raises the tax-exempt level of income to ₹12.75 lakh.
Major Tax Reforms and Their Implications
Revision in TDS Limit for Rent Income
Union Budget 2025 has recommended amending the TDS limit for rent income. The limit is proposed to be raised from ₹2,40,000 annually to ₹6,00,000 annually, or an effective ₹50,000 a month. The amendment will ease tax compliance for both landlords and tenants.
Tax Relief on Two Self-Occupied Properties
Earlier, the taxpayer was allowed a NIL annual value on one self-occupied house alone, with the rest of the properties charging tax on notional rent received. The new amendment provides that the annual value is allowable for a maximum of two self-occupied houses, cutting down on the tax payable and inducing investment in more houses.
The real estate sector has responded positively to these tax reforms. Large real estate players such as Prestige Estates, DLF, and Sobha registered significant gains in the 3.3% rise in the Nifty Realty Index that came after the budget announcement. Analysts forecast that the increased disposable income generated by these tax reductions will drive luxury housing demand while at the same time driving demand for affordable housing, particularly in Tier 2 and Tier 3 cities.
Neeraj Sharma, Managing Director of Escon Infra Realtors, welcomes these changes, stating: “With the real estate market booming, these new tax provisions could not have been timed better. Increasing the income tax exemption limit to ₹1,200,000 is a welcome relief for homebuyers, particularly first-time buyers, as it increases their spending power, enabling them to spend larger budgets or comfortably service EMIs. On the investment side, the new TDS limit on rental income is a much-needed assurance, enabling landlords to manage their returns better. With these reassuring policies, we can look forward to a boom in property deals, greater investor confidence, and a positive turn for homeownership and the rental market.”
Vansh Kataria, Co-founder of Tirasya Estates, highlights the benefits of these tax amendments:
“The recent income tax amendments are a great move for homebuyers. Allowing tax exemption on two self-occupied properties acknowledges the evolving needs of homebuyers, especially those investing in luxury homes or seeking a second home for future security. In addition, the revision in TDS on rental income is another welcome step in reducing unnecessary tax hassles for landlords. As developers, we believe these changes will positively impact real estate sentiment, encouraging more buyers to invest without additional financial burden.”
Prospects for the Real Estate Market
Real estate is going to grow at a rapid rate with increased affordability, improved rental income clarity, and increased financial flexibility for purchase. These tax reforms are set to trigger real estate transactions, boost investor confidence, and make real estate India’s most preferred investment option.
