Own two houses? For AY 2026-27 you can stay on ITR-1 Sahaj or ITR-4 Sugam instead of switching to ITR-2
CBDT Notification 45/2026 lets resident taxpayers with income up to Rs 50 lakh report two house properties on ITR-1 or ITR-4 for AY 2026-27. Eligibility, worked example and pitfalls.
Key points
- CBDT's Notification No. 45/2026 dated 30 March 2026 lets ITR-1 Sahaj and ITR-4 Sugam filers report two house properties instead of one.
- The change applies to AY 2026-27 returns for residents with total income up to Rs 50 lakh, and house-property loss set-off on these forms stays capped at Rs 2,00,000.
- Taxpayers still filing a belated or revised AY 2026-27 return by 31 December 2026 can use the simpler form unless another exclusion, such as foreign assets, applies.
Until last year, owning a second flat was enough to push a salaried taxpayer off the one-page ITR-1 and onto the longer ITR-2. For assessment year (AY) 2026-27, that changed. Through Notification No. 45/2026 (G.S.R. 226(E)) dated 30 March 2026, the Central Board of Direct Taxes (CBDT) replaced the words "one house property" with "two house properties" in rule 12 of the Income-tax Rules, 1962. The change came into force on 31 March 2026 and applies to returns filed for AY 2026-27, which covers income earned in financial year (FY) 2025-26.
The same notification extends the relaxation to ITR-4 (Sugam), the form used by small businesses and professionals who declare income on a presumptive basis. If you are still filing a belated or revised return for AY 2026-27, the deadline under sections 139(4) and 139(5) of the Income-tax Act, 1961 is 31 December 2026, so it is worth checking now whether the simpler form fits. The official notification is published on the Income Tax Department portal.
What the Section Says
Rule 12(1) of the Income-tax Rules, 1962 lists which return form each class of taxpayer must use. The 30 March 2026 amendment made two textual substitutions, both replacing "one house property" with "two house properties":
| Provision amended | Form affected | Old wording | New wording (AY 2026-27) |
|---|---|---|---|
| Rule 12(1)(a)(ii) | ITR-1 Sahaj | one house property | two house properties |
| Rule 12(1)(ca), proviso, item (IG) | ITR-4 Sugam | one house property | two house properties |
Who can use ITR-1 Sahaj for AY 2026-27
The header of the substituted ITR-1 says the form is for individuals who are resident (other than not ordinarily resident), with total income up to Rs 50 lakh, and income from these sources only:
- Salary or pension
- Up to two house properties
- Other sources, such as savings-account and deposit interest
- Long-term capital gains (LTCG) under section 112A up to Rs 1.25 lakh
- Agricultural income up to Rs 5,000
ITR-1 is expressly not for an individual who is a director in a company, who has invested in unlisted equity shares, who has had TDS deducted under section 194N, whose tax on ESOPs is deferred, or who has assets (including a financial interest in any entity) located outside India. See our ITR glossary entry for how the forms differ more generally.
Who can use ITR-4 Sugam for AY 2026-27
The new ITR-4 header covers individuals, Hindu Undivided Families (HUFs) and firms other than LLPs that are resident, with total income up to Rs 50 lakh, business or professional income computed under sections 44AD, 44ADA or 44AE, and section 112A LTCG up to Rs 1.25 lakh. Like ITR-1, it now accepts up to two house properties. It excludes company directors, investors in unlisted equity, deferred ESOP tax cases, anyone with agricultural income above Rs 5,000 and anyone with foreign assets. Our presumptive taxation guide and presumptive tax calculator explain sections 44AD and 44ADA.
What the house-property schedule now asks for
Schedule B2 of ITR-1 (Schedule B3 of ITR-4) instructs you to "fill up details separately for each property for up to 2 properties". For each property, the form asks for:
| Field | What to enter |
|---|---|
| Ownership | Whether co-owned, your percentage share, and each co-owner's name and PAN or Aadhaar |
| Type | Let out, self-occupied or deemed let out |
| Tenant | Name and PAN or Aadhaar; mandatory if tax was deducted under section 194-IB (TAN if deducted under section 194-I) |
| 1a | Gross rent received or receivable, or lettable value |
| 1b, 1c | Rent that cannot be realised; taxes paid to the local authority |
| 1e, 1f | Annual value (nil if self-occupied under section 23(2)), then your share of it |
| 1g | 30% of annual value (the standard deduction under section 24(a)) |
| 1h | Interest payable on borrowed capital |
| 1j | Arrears or unrealised rent received during the year, less 30% |
The form carries a note: the maximum house-property loss that can be set off is Rs 2,00,000, and to carry forward the balance you must use ITR-2 (from ITR-4, the note points to ITR-3 or ITR-5). The underlying law on annual value and deductions sits in sections 22 to 27 of the Income-tax Act, 1961 on India Code.
Worked Example
Take Priya, a resident salaried employee in FY 2025-26 with gross salary of Rs 14,00,000 and no other income. She owns two flats:
- Flat 1 is where she lives (self-occupied). Home-loan interest paid in the year: Rs 1,50,000.
- Flat 2 is let out at Rs 25,000 a month, so gross rent is Rs 3,00,000. Municipal tax paid: Rs 12,000. Home-loan interest: Rs 80,000.
Under last year's rules she would have needed ITR-2. For AY 2026-27 she can file ITR-1, because she has two house properties, total income below Rs 50 lakh and no disqualifying item.
Step 1: compute income from house property
| Line | Flat 1 (self-occupied) | Flat 2 (let out) |
|---|---|---|
| 1a Gross rent | Nil | Rs 3,00,000 |
| 1c Municipal tax | Nil | Rs 12,000 |
| 1e Annual value | Nil | Rs 2,88,000 |
| 1g 30% standard deduction | Nil | Rs 86,400 |
| 1h Interest (old regime) | Rs 1,50,000 | Rs 80,000 |
| 1k Income (old regime) | (-) Rs 1,50,000 | Rs 1,21,600 |
Under the old regime, net house-property income is Rs 1,21,600 minus Rs 1,50,000, a loss of Rs 28,400, which sits well within the Rs 2,00,000 set-off limit. Under the new regime in section 115BAC, interest on a self-occupied house is not deductible, so Flat 1 contributes nil and net house-property income is Rs 1,21,600. You can test your own numbers in the income from house property calculator.
Step 2: compare the regimes
The slabs, standard deduction and 4% cess below are the FY 2025-26 figures. For simplicity, Priya claims no Chapter VI-A deductions.
| Item | New regime | Old regime |
|---|---|---|
| Gross salary | Rs 14,00,000 | Rs 14,00,000 |
| Standard deduction | Rs 75,000 | Rs 50,000 |
| Income from salary | Rs 13,25,000 | Rs 13,50,000 |
| Income from house property | Rs 1,21,600 | (-) Rs 28,400 |
| Total income | Rs 14,46,600 | Rs 13,21,600 |
| Tax before cess | Rs 96,990 | Rs 2,08,980 |
| Section 87A rebate | Nil (income above Rs 12 lakh) | Nil (income above Rs 5 lakh) |
| Cess at 4% | Rs 3,880 | Rs 8,359 |
| Total tax | Rs 1,00,870 | Rs 2,17,339 |
The new-regime figure works out as 5% on Rs 4 lakh to Rs 8 lakh (Rs 20,000), 10% on Rs 8 lakh to Rs 12 lakh (Rs 40,000) and 15% on the remaining Rs 2,46,600 (Rs 36,990). The old-regime figure is Rs 12,500 plus Rs 1,00,000 plus 30% of Rs 3,21,600 (Rs 96,480). For Priya, the new regime saves Rs 1,16,469, and both computations fit on ITR-1. Run your own comparison with the old vs new regime calculator or the full income tax calculator.
When the second flat pushes you back to ITR-2
Now suppose Flat 2 carried Rs 4,50,000 of loan interest instead of Rs 80,000. Its income becomes Rs 2,88,000 minus Rs 86,400 minus Rs 4,50,000, a loss of Rs 2,48,400. Added to Flat 1's Rs 1,50,000 loss, the total old-regime loss is Rs 3,98,400. Only Rs 2,00,000 can be set off in AY 2026-27; the remaining Rs 1,98,400 can be carried forward only if Priya files ITR-2, as the form's own note says.
Common Mistakes
1. Filing ITR-1 with three properties. The amendment says "two house properties", not "any number". A taxpayer with a third flat, even a vacant one, still needs ITR-2 for AY 2026-27.
2. Ignoring the Rs 50 lakh ceiling. Rental income from the second property counts towards total income. In the example above, Flat 2 added Rs 1,21,600; a salaried taxpayer at Rs 49 lakh who adds such rent crosses Rs 50 lakh and loses ITR-1 eligibility.
3. Choosing ITR-1 when a carry-forward is needed. If combined house-property loss exceeds Rs 2,00,000, ITR-1 (and ITR-4) only let you set off Rs 2,00,000. Filing the simpler form forfeits the carry-forward route that ITR-2 (or ITR-3 or ITR-5) provides.
4. Claiming self-occupied interest in the new regime. Section 115BAC disallows interest on a self-occupied house. In the worked example, entering Rs 1,50,000 against Flat 1 under the new regime would understate income by that amount and invite a mismatch notice.
5. Leaving out co-owner and tenant details. Each of the two property rows asks for co-ownership percentage and co-owner PAN or Aadhaar. The tenant's PAN or Aadhaar is mandatory where tax was deducted under section 194-IB, and the TAN is mandatory where deducted under section 194-I. Missing identifiers stop the TDS credit matching your Form 26AS.
6. Reporting full rent on a jointly owned flat. Line 1f applies your percentage share to annual value. A 50% co-owner of Flat 2 would report Rs 1,44,000, not Rs 2,88,000, before the 30% deduction.
7. Overlooking the other exclusions. Holding unlisted shares, a directorship, foreign assets, deferred ESOP tax or section 112A gains above Rs 1.25 lakh each still rule out ITR-1, regardless of how many houses you own. See our LTCG explainer for the section 112A threshold.
FAQ
Which assessment year does the two-house-property change apply to?
It applies to returns filed for AY 2026-27, which covers FY 2025-26 (1 April 2025 to 31 March 2026). The amending rules came into force on 31 March 2026 under Notification No. 45/2026.
Can I file ITR-1 if I own two houses and both are self-occupied?
Yes, provided you meet the other ITR-1 conditions. The form lets you mark each of up to two properties as self-occupied, and line 1e shows annual value as nil where section 23(2) applies.
I own one let-out flat and one self-occupied flat. Do I still need ITR-2?
Not for AY 2026-27, if your total income is up to Rs 50 lakh and none of the exclusions apply. You report both properties in Schedule B2 of ITR-1, as in Priya's example with Rs 3,00,000 of rent.
Does the change help freelancers on presumptive taxation?
Yes. ITR-4 Sugam, for resident individuals, HUFs and firms (other than LLPs) with total income up to Rs 50 lakh and income under sections 44AD, 44ADA or 44AE, now also accepts up to two house properties.
What happens if my house-property loss is more than Rs 2,00,000?
ITR-1 and ITR-4 allow only Rs 2,00,000 of house-property loss to be set off in the year. To carry the excess forward, the forms direct you to ITR-2 (salaried) or ITR-3 or ITR-5 (business).
I already filed ITR-2 for AY 2026-27. Must I refile on ITR-1?
No. Nothing in Notification No. 45/2026 requires a taxpayer who filed ITR-2 to refile. The amendment widens eligibility for the simpler form; it does not make ITR-2 invalid for someone with two properties.
Is there still time to file for AY 2026-27?
A belated return under section 139(4) or a revised return under section 139(5) for AY 2026-27 can be filed up to 31 December 2026, unless the assessment is completed earlier. Check the current form and utility on incometax.gov.in before filing.
This explainer is general information based on CBDT Notification No. 45/2026 dated 30 March 2026 and is not tax advice. Confirm eligibility against the form on the e-filing portal before you file.
Sources & Citations
- Notification No. 45/2026 - Income-tax (Second Amendment) Rules, 2026 (G.S.R. 226(E), 30 March 2026) — Income Tax Department
- The Income-tax Act, 1961 — India Code
- ITR-1 (Sahaj) - who is eligible — Income Tax Department