You Can Treat Two Homes as Self-Occupied for Tax. The Third Is "Deemed Let Out"

The third home

A third home that is not rented out is treated as deemed let out. You are taxed on the rent it could reasonably earn, even if it sat empty. The standard deduction and home loan interest deduction still apply against that notional rent.

Which homes to choose

You choose which two are self-occupied. In general, it helps to treat as deemed let out the home with the lowest notional rent, or the one with the largest loan interest. Your CA can run both options.

NRIs

An NRI with a flat in Mumbai and a home abroad should look at this with a CA too, especially if the Mumbai flat sits vacant.

A practical point

If a vacant flat is going to be taxed on notional rent anyway, it may be worth renting it out. See managing a vacant flat in Mumbai and rental income tax under the 2025 Act.

Note: the Income-tax Act, 2025 applies from 1 April 2026. Confirm the matching section for your return with your CA.

Frequently asked questions

How many houses can be self-occupied for income tax?

Two. Since Budget 2025, two houses can have nil annual value if the owner cannot actually occupy them for any reason, provided they were not let out during the year.

Is a vacant third flat taxed?

Yes. A third home that is not let out is treated as deemed let out and taxed on the rent it could reasonably earn.

Sources

• EMI Calculator: Union Budget 2025 change for owners of multiple houses
• ClearTax: Income tax if you own more than one house property

This is general information, not legal or tax advice. Rules change, so check your own case with a lawyer or CA.

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Warmly,
Yanik