The nil annual value is conditional
Section 21(5) of the Income-tax Act, 2025 provides nil annual value up to two years from the end of the financial year in which the competent-authority completion certificate is obtained, for qualifying property held as stock-in-trade and not let wholly or partly at any time during the tax year. This guide applies to tax year 2026–27 and uses the Act as amended by Finance Act, 2026, checked on 26 October 2026. The amendment’s operative wording is “nil up to”; do not treat an original Bill or an older draft as the current text. Income Tax Department: amended Income-tax Act, 2025, sections 20–22.
Anchor the date to the statutory document
A builder’s internal completion note, accounting transfer to finished inventory, first booking or customer possession is not automatically the certificate specified by the provision. Retain the competent authority’s certificate, evidence of when it was obtained and its unit, building or phase coverage. If documents use different dates or cover only part of the development, resolve those facts before applying one date to all inventory. Do not invent a certificate date because the ledger says construction is complete.
Compute from the end of the financial year
The section 21(5) window runs from the end of the certificate financial year, not simply for twenty-four months from the certificate day. Maintain the certificate financial-year end, the date two years later and each tax year under review. A certificate obtained near year-end and one obtained early in the same financial year lead to the same outer date. A change of accounting year or delayed return does not restart this statutory clock.
Test stock status and actual letting
Preserve the inventory register, ownership evidence and unit-level letting records. The relief concerns the qualifying property or part; a project can contain sold units, eligible unsold units and units requiring separate rental analysis. A unit let for even part of the year cannot simply be labelled never-let because the lease ended before closing. Genuine occupation for the owner’s taxable business, residential self-occupation and letting/vacancy are different statutory enquiries; do not use their rules interchangeably.
Expiry does not prescribe a rent percentage
Once this window is unavailable, determine the applicable treatment under sections 20–22 and other relevant law on the actual facts. Section 21(5) supplies no automatic annual rental yield on construction cost or market value. Section 21(1) addresses reasonable expected letting value and, where let, actual rent; subsection (2) has its own letting-and-vacancy conditions. Zero cash rent is not itself proof of zero annual value after expiry. Subsection (3) separately addresses local-authority taxes actually paid by the owner. Any deduction, loss restriction or business-income characterisation must be analysed independently.
A closing file should explain exclusions
The useful output is a unit-wise eligibility schedule, not a single project-wide nil figure. Document the assessment of certificate coverage, stock status, letting and the outer date, then list units excluded and why. Do not automatically exempt disposal profits, GST or other project income merely because the qualifying annual value is nil. The following illustrations calculate dates and control totals, not final income tax, deemed rent rates or a universal legal conclusion on every developer’s income head.
Applicable primary references
Income Tax Department: amended Income-tax Act, 2025, sections 20–22 Income Tax Department: section 21, 2026 text
Six worked illustrations
All facts and amounts below are fictional. Assumptions describe the model, not additional statutory rules.
Illustrative example 1: Certificate in the preceding financial year
A qualifying certificate is obtained on 15 December 2025, within FY 2025–26 ending 31 March 2026. Two years from that year-end takes the outer date to 31 March 2028. An otherwise qualifying never-let stock unit remains within the window for tax year 2026–27.
Illustrative example 2: An older certificate expires before the year
A certificate obtained on 10 July 2023 falls in FY 2023–24, ending 31 March 2024. The two-year endpoint is 31 March 2026. The window has ended before tax year 2026–27 begins on 1 April 2026; unsold status alone does not extend it.
Illustrative example 3: Same financial year, different certificate days
Certificates obtained on 5 April 2025 and 20 March 2026 both belong to FY 2025–26 and have a 31 March 2028 endpoint. Simply adding two years to the individual certificate days would instead produce 5 April 2027 and 20 March 2028, neither of which is the statutory year-end calculation.
Illustrative example 4: Mixed inventory
A project has 40 units: 10 sold before the year, 6 let during the year and 24 remaining as qualifying never-let stock within the certificate window. The candidate nil-value population is 40 − 10 − 6 = 24, or 60% of the original unit count. The other 16 require their appropriate separate treatment; this count is not a value allocation.
Illustrative example 5: Phase-specific certificate coverage
Phase A has 18 eligible units supported by a certificate obtained in FY 2025–26. Phase B has 12 units whose certificate coverage has not been established. Of 30 units, only 18 are supported for this certificate-based working; 12 remain unresolved. Phase A’s document must not silently be extended to Phase B.
Illustrative example 6: Post-window valuation working
Assume a correctly identified post-window property has a supported annual value of ₹6,00,000 under the applicable general rules, and the owner actually pays qualifying local-authority taxes of ₹40,000 during the year. The subsection (3) reduction leaves ₹5,60,000 before section 22 deductions and other applicable adjustments. Neither ₹6,00,000 nor the tax payment is a statutory flat estimate for all unsold units.
Ten-step verification table
| Step | Action | Evidence |
|---|---|---|
| 1 | Identify the tax year and law version | 2026–27 computation and amended section 21(5). |
| 2 | Confirm ownership and property identity | Title records and unit/phase register. |
| 3 | Establish stock-in-trade classification | Inventory accounts and consistent factual evidence. |
| 4 | Obtain the actual completion certificate | Competent authority, document and receipt evidence. |
| 5 | Map the certificate’s coverage | Specific buildings, phases and units. |
| 6 | Determine its financial-year end | Certificate date mapped to 31 March. |
| 7 | Calculate the two-year endpoint | Dated working and prior-year continuity. |
| 8 | Verify whole-year letting history | Agreements, occupancy records and rental ledgers. |
| 9 | Analyse excluded or expired units | Applicable income-head, annual-value and deduction workings. |
| 10 | Reconcile the final return schedule | Eligible nil amounts, exclusions and unresolved evidence. |
Sixteen practitioner FAQs
1. Does being unsold automatically mean nil annual value?
No. Stock status, letting history, certificate evidence and the time window must be tested.
2. Which law applies to tax year 2026–27?
The Income-tax Act, 2025 as amended for that year, rather than blindly reusing legacy section numbers.
3. What wording did Finance Act, 2026 introduce here?
The operative text uses “nil up to” in subsection (5).
4. Does the clock start on the certificate’s exact day?
The two-year period is measured from the end of the financial year in which the certificate is obtained.
5. Does a late return extend that period?
No. Return timing does not restart the certificate-based window.
6. Can an internal engineer’s report replace the specified certificate?
Do not assume so. Identify the competent-authority completion certificate required by the provision.
7. Should one project certificate be applied to every phase?
Only where its actual coverage supports that treatment.
8. Can a unit let briefly be called never-let at year-end?
No. The condition examines letting at any time during the tax year.
9. Can units within one project have different results?
Yes. Ownership, stock classification, certificate coverage and letting can differ.
10. Does the relief apply only to companies?
The provision is not framed as a company-only rule; the actual assessee and property conditions matter.
11. Is a standard percentage of stock cost prescribed after expiry?
No. Section 21(5) prescribes no such yield.
12. Does no rent received prove nil value after expiry?
No. The applicable annual-value and vacancy provisions require their own analysis.
13. Are local taxes deductible merely when accrued?
Section 21(3) refers to taxes actually paid during the tax year by the owner.
14. Does nil annual value exempt eventual sale profits?
No. The sale and its income classification require a separate computation.
15. Does this automatically settle GST on the property?
No. GST is a separate statutory enquiry.
16. What is the central closing control?
A supported unit-wise schedule showing certificate coverage, endpoint, letting and reasons for exclusions.
Conclusion
Track the competent-authority completion certificate and letting history unit by unit before claiming nil annual value for unsold property held as stock.