Real Estate Tax Benefits in Budget 2025: Everything You Need to Know

The Union Budget 2025-26, presented by Finance Minister Nirmala Sitharaman on February 1, 2025, marks a significant milestone as her eighth consecutive budget. With India’s GDP projected to grow between 6.3% and 6.8% and a fiscal deficit target set at 4.4%, the budget places a strong emphasis on key sectors, particularly real estate. Recognized as a crucial contributor to economic expansion and employment, the real estate sector is projected to contribute 15.5% to India’s GDP by 2047, up from the current 7.3%.

Key Real Estate Tax Benefits Announced in Budget 2025

1. Increased Annual TDS Limit on Rental Income

The threshold for Tax Deducted at Source (TDS) on rental income has been raised from ₹2.4 lakh to ₹6 lakh per year. This revision will ease the tax burden on homeowners earning lower rental incomes.

2. Home Loan Tax Deductions Enhanced

A major relief for homeowners, the deduction on interest payments under Section 24(b) has been increased from ₹2 lakh to ₹3 lakh. This revision provides significant tax savings for homebuyers facing high interest rates.

Meanwhile, the deduction for principal repayment under Section 80C remains capped at ₹1.5 lakh per year. These measures collectively enhance the affordability of homeownership.

3. Tax Benefits on Multiple Self-Occupied Properties

Previously, taxpayers could only claim tax benefits on one self-occupied property. The new budget allows deductions for two self-occupied homes, reducing the tax burden for homeowners with multiple properties.

4. Zero Tax on Income Up to ₹12 Lakh

One of the most significant announcements is the exemption of income up to ₹12 lakh from taxation. This move increases disposable income for middle-class families, enhancing their purchasing power and indirectly boosting demand in the real estate market.

5. SWAMIH Fund 2.0 for Affordable Housing

The Special Window for Affordable and Mid-Income Housing (SWAMIH) fund has successfully delivered 50,000 homes in stalled housing projects as of January 2025. To further this initiative, the government has allocated ₹15,000 crore under SWAMIH Fund 2.0, with a target of completing 1 lakh stalled housing units. This measure will revitalize the affordable and mid-income housing segment.

Additional Home Loan Tax Benefits

Beyond the enhanced deductions, homeowners can also benefit from:

• Section 80EEA: An additional deduction of ₹1.5 lakh for first-time homebuyers of affordable housing (subject to eligibility conditions).
• Section 24(b): Increased deduction of ₹3 lakh on interest payments for self-occupied properties.

What These Changes Mean for Homebuyers

The real estate-related tax benefits introduced in Budget 2025 offer multiple advantages:

• Greater tax savings: Increased deductions on home loan interest reduce overall tax liability.
• Encouragement for first-time buyers: Additional tax benefits make property investment more attractive.
• Boost to the real estate sector: Increased demand for housing is expected to drive market growth.

Conclusion

The 2025-26 Union Budget introduces significant tax benefits for homebuyers, making property ownership more financially viable. From higher TDS limits and increased home loan deductions to tax exemptions on self-occupied properties, these measures collectively contribute to the growth of the real estate sector. As a result, homebuyers can now look forward to greater savings and enhanced affordability in their property investments.