Section 21(5) of the Income-tax Act, 2025 says annual value is nil for two years for a property held as stock-in-trade when it is not let wholly or partly during the tax year. The period runs from the end of the financial year in which the competent authority issues the construction-completion certificate. This is a narrow income-tax rule for qualifying business inventory, not an automatic exemption for every vacant home. The Income Tax Department’s section 21 text sets out the test.
The conditions in section 21(5)
The provision has three connected parts: the property is held as stock-in-trade; it is not let at any time during the tax year; and the two-year period is counted from the end of the financial year when the completion certificate is obtained. If any of those facts differ, the section’s stated treatment may not apply as described here.
That distinction matters for an unsold apartment. A unit held by a builder as trading inventory is not automatically the same tax category as a home held personally by an individual. Section 21(5) addresses annual value for income-tax purposes. It does not announce a municipal property-tax waiver or calculate a taxpayer’s final liability.
BestProp.ai’s boundary: stock-in-trade is the key test
The statutory wording refers to a completion certificate from the competent authority, not simply a marketing launch, a booking date or a buyer’s possession date. A business reviewing a particular unit needs to establish how the property is classified, whether any part was let during the year and which certificate date governs the period.
This explanation is deliberately limited to the text of section 21(5). It does not resolve accounting treatment for an individual business, interpret a disputed completion certificate or calculate tax due. BestProp.ai’s earlier ITR-1 explainer on reporting up to two house properties concerns a different issue: individual return-form eligibility, not builder inventory valuation.
Does section 21(5) apply to every empty home?
No. Its text applies to property held as stock-in-trade that is not let during the tax year, subject to the stated timing rule. A personally held vacant home should not be assumed to qualify under this subsection.
Is this a municipal property-tax exemption?
No such municipal exemption appears in section 21(5). The provision concerns annual value under the Income-tax Act.
Source and limitation
BestProp.ai reviewed the Income Tax Department’s published text of section 21 on 22 October 2026. The article explains the subsection’s conditions only; property classification, certificate records and the rest of a taxpayer’s circumstances can change the analysis.