The government has withdrawn its earlier proposal to impose a higher tax rate on vacant residential properties under the New Income Tax Bill, 2025. This decision comes after the recommendations of a Parliamentary Select Committee, which reviewed feedback from taxpayers, industry representatives, and housing experts.
Initially, the bill aimed to introduce additional tax on unoccupied properties to discourage speculative buying and improve housing availability. However, the committee highlighted concerns about penalizing genuine property owners who may keep a home vacant due to work transfers, relocation abroad, or other unavoidable reasons.
The revised approach removes the punitive provision and focuses instead on improving property tax compliance through better data sharing between municipal bodies and tax authorities. It also encourages states to introduce incentives for renting out idle properties rather than imposing blanket higher tax rates.
Key Changes in the New Income Tax Bill 2025
Removal of Higher Tax on Vacant Properties: Owners will not face increased tax liability solely because their property remains unoccupied.
Consideration for Genuine Circumstances: The change recognizes legitimate reasons for keeping properties vacant, avoiding undue financial burden on such owners.
Data Integration for Compliance: Strengthened coordination between local municipalities and the income tax department to improve property-related tax compliance.
Promotion of Rental Market: Encouragement for state-level initiatives offering benefits to property owners who make vacant homes available for rent.
Focus on Housing Availability: Instead of penalties, the government is exploring long-term solutions to increase housing stock accessibility.
Who Should Take Action – Specific Advice
Property owners with multiple homes, especially those used seasonally or left vacant, can now expect relief from additional tax pressures. However, they should ensure proper reporting of property details in their annual returns. Real estate investors may explore renting options to generate income while staying compliant with local rules.
India Advocacy Insight
This change in the Income Tax Bill 2025 reflects a balanced approach—protecting property owners from unfair penalties while promoting better housing utilization. At India Advocacy, we recommend that owners and investors use this opportunity to review property portfolios, optimize rental potential, and stay ahead of compliance requirements.
