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Budget 2025: Real Estate Gains with Tax Cuts, New Investment Fund

2025-02-11

India's construction and real estate sectors are poised for a significant boost, thanks to a series of strategic policy reforms announced by the finance minister. Aimed at revitalising stalled housing projects and spurring urban development, these initiatives include the launch of a new investment fund and tax relief measures that promise to ease financial burdens and stimulate market activity. As the government rolls out these changes, we are set to witness a transformative impact on the housing landscape, with benefits extending to homebuyers, investors, and the broader economy. This simplified overview delves into the heart of the budget summary, breaking down the complex financial jargon into understandable terms, and highlighting how these policies are designed to pave the way for a thriving real estate sector in India.

Annual Value of self-occupied house –

The annual value of property is considered as NIL while computing income under the head ‘house property’ in case of:

Self-occupied house; and
Another owned house, where it cannot be occupied due to employment, business or profession carried on at any other place.

This amendment is effective from 1 April 2025.

In lay man terms - when it comes to taxes on homes, in case you own two houses and occupy only one out of the two properties, you won't have to pay tax on the second house. The amendment is a welcome change from taxpayers’ perspective, as they can avail Nil annual value for two self-occupied properties irrespective of any reason for actually not occupying the said second property which was not the case earlier, where the second property was mandatorily taxed as Deemed Let out property.

Benefit of lower tax rate extended on long-term capital gains to business trust

Income of business trust other than short term capital gains on equity shares listed on recognized stock exchange, unit of equity-oriented fund, unit of business trust (listed securities) and long-term capital gains on assets other than listed securities was taxable at maximum marginal rate (MMR).

Due to this long-term capital gains on listed securities is taxed at MMR in the hands of business trust.

In order to rationalise taxation of business trust, long term capital gains on listed securities will now be taxed at 12.51 per cent instead of MMR.

This amendment is effective from 1 April 2026.

Rationalisation of threshold for TDS on rental income

Any person, other than individual and HUF, paying rent of an amount exceeding INR 2,40,000 during the year was required to deduct tax at the rate 2 per cent/10 per cent.

The threshold amount of Rs 2,40,000 has been amended to Rs 50,000 per month making it to Rs 6,00,000 annually effective from 1 April 2025, thus providing compliance relief to tenants.

Amendment in input tax credit provisions under GST law

Section 17 (5) (d) of the CGST Act is proposed to be amended retrospectively i.e. from July 1, 2017 which provides for restrictions on claiming input tax credit on certain items.

Amendment has been introduced in the CGST Act relating to input tax credit provisions, to replace ‘plant or machinery’ with ‘plant and machinery’.

This amendment is effective from 1 July 2017.

Key policy announcements

Urban sector reforms to be incentivized for urban land development.
Urban Challenge Fund of Rs 1 lakh crore to be set-up for implementation of proposals announced in July 2024 Budget such as ‘Cities as growth hubs’, ‘Creative redevelopment of cities’ and ‘Water and Sanitation’. An allocation of Rs 10,000 crore is proposed for Financial Year 2025-26.
With the success of SWAMIH Fund I, another fund (SWAMIH Fund 2) of Rs 15,000 crore will be established as a blended finance facility with contribution from Government, banks and private investors for expeditious completion of 1 lakh units in stressed housing projects.
With a focus to develop 50 tourism sites across country, land for building key infrastructure to be provided by states and hotels in such tourism sites will be included in Infrastructure Harmonised Master List. This will also facilitate employment led growth in these sites.

The Budget aims to continue the Viksit Bharat journey with a focus on making the real estate and building sectors stronger which is evident from strong emphasis on urban development and setting up of another fund under Public-Private Partnerships (PPP) for providing support to stressed housing projects. The government’s proposal to eliminate the deemed taxation on second residential properties is poised to significantly incentivize home buying, fostering greater interest in the housing market. Additionally, the relaxation of the tax burden for individuals earning up to Rs 12 lakhs is expected to boost disposable income, creating enhanced opportunities for investment in India’s growing real estate sector. These measures collectively aim to stimulate demand, empower individuals, and drive growth in the property market. The plan is to keep developing the country in a way that lasts a long time and helps the building and housing industry grow.

(Note: This is an authored article by Purrvil Shah, Senior Manager, Indirect Taxes, EY LLP.)