Deductions in respect of Profits and Gains from Housing Projects (Section 80IBA)
Objective: In order to provide impetus to affordable housing sector to achieve the larger objective of ‘Housing for All‘, section 80-IBA has been inserted.
Quantum of deduction: Where the gross total income of an assesse includes any profits and gains derived from the business of developing and building housing projects, an amount equal to 100% of the profits and gains derived from such business is allowable as deduction under section 80-IBA, subject to fulfilment of certain conditions.
Conditions to be fulfilled for claim of Section 80IBA deduction:
♣ The project is approved by the competent authority after 1st June, 2016 but on or before 31st March, 2020;
♣ The project is completed within a period of Five years from the date of approval by the Competent authority;
♣ the carpet area of the shops and other commercial establishments included in the housing Project does not exceed 3% of the aggregate carpet area;
No Section 80IBA deduction for person executing the housing project as a works contract:
An assesse who merely executes the housing project as a works-contract awarded by any person (including the Central Government or the State Government) would not be eligible for deduction under this section.
Consequence of non-completion of housing project within 5 years:
Deduction so claimed and allowed in one or more previous years, shall be deemed to be the income of the assesse chargeable under the head “Profits and gains of business or profession” of the previous year in which the period for completion so expires.
Finance Act, 2019 has made certain Amendments to this Section which were explained in detailed below:
Additional conditions to be fulfilled if the project is approved by the competent authority before 1st Sep, 2019
- Where a residential unit in the housing project is allotted to an individual, no other residential unit in the housing project shall be allotted to the individual or the spouse or the minor children of such individual.
- Conditions relating to size of plot of land, residential units etc.:-
| S.No | Location of the Housing Project | Size of the Plot on which Project is Located | Carpet area of the residential unit comprised in the housing project | Percentage of floor area ratio to be utilized by the project |
| 1 | Within the cities of Chennai, Delhi, Kolkata or Mumbai | Not Less Than 1000 Sq.m | Not More Than 30 Sq.m | Not less than 90% of the floor area ratio permissible in respect of the plot of land under the rules to be made by the Central Government or the State Government or the local authority, as the case may be. |
| 2 | In any Other Place | Not Less Than 2000 Sq.m | Not More Than 60 Sq.m | Not Less than 80% of such Floor Area Ratio |
- The project is the only housing project on the plot of land.
- The assessee maintains separate books of account in respect of the housing project.
Additional conditions to be fulfilled if the project is approved by the competent authority after 1st Sep, 2019
- Where a residential unit in the housing project is allotted to an individual, no other residential unit in the housing project shall be allotted to the individual or the spouse or the minor children of such individual.
- The project is the only housing project on the plot of land.
- The assesse maintains separate books of account in respect of the housing project.
- The stamp duty value of a residential unit in the housing project does not exceed Rs. 45 lakhs.
- Conditions relating to size of plot of land, residential units etc.:-
| S.No | Location of the Housing Project | Size of the Plot on which Project is Located | Carpet area of the residential unit comprised in the housing project | Percentage of floor area ratio to be utilized by the project |
| 1 | Within the metropolitan cities of Bengaluru, Chennai, Delhi National Capital Region (limited to Delhi, Noida, Greater Noida, Ghaziabad, Gurugram, Faridabad), Hyderabad, Kolkata and Mumbai (whole of Mumbai Metropolitan Region) | Not Less Than 1000 Sq.m | Not More Than 60 Sq.m | Not less than 90% of the floor area ratio permissible in respect of the plot of land under the rules to be made by the Central Government or the State Government or the local authority, as the case may be. |
| 2 | In any Other Place | Not Less Than 2000 Sq.m | Not More Than 90 Sq.m | Not Less than 80% of such Floor Area Ratio |
Author’s Note:-
Generally Every Year, only One Budget will be Introduced. But in 2019 there were 2 budgets Introduced.
Therefore it is important to remember the date from which the said amendment comes into force.
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