Section 80-IBA Housing Project Deduction: Key Details & Amendments

Section 80-IBA offers a 100% deduction on profits from developing housing projects, introduced via the Finance Act 2016, effective from April 1, 2017. The deduction applies to projects approved by competent authorities between June 1, 2016, and March 31, 2022. Projects must be completed within five years from the approval date, with specific conditions on land area, unit size, and stamp duty valuation. For metro cities, residential units must not exceed 60 square meters in carpet area, while for other locations, the limit is 90 square meters. Amendments over the years have adjusted project completion timelines and area specifications, including a transition from built-up area to carpet area measurements. Section 80-IBA supersedes the previous Section 80-IB(10), which addressed similar deductions before 2017. Notably, failure to complete a project within the stipulated period results in the deduction being deemed as income for that year. Several judicial rulings have affirmed that developers do not need to own the land to qualify for deductions under this section. Furthermore, projects under Central or State Government schemes for slum redevelopment do not qualify for deductions under this provision.

SECTION: 80-IBA – Quantum of Deduction: 100% of the Profits and Gains

(Introduced via Finance Act’ 2016: From 01-Apr-2017)

Change Matrix

Changes in	From 01-04-2017	From 01-04-2018	From 01-04-2019
Period of Completion	3 Years	5 Years (From 1-4-18)	–
Shop Area (incl. Commercial Establishment)	Not more than 3% of aggregate Build-up Area	Build Up Area Word has been substituted with Carpet Area	–
Metro Cities	Cities of Chennai, Delhi, Kolkata or Mumbai or within the distance, measured aerially, of 25 kilometres from the municipal limits of these cities.	Cities of Chennai, Delhi, Kolkata or Mumbai or within the distance, measured aerially, of 25 kilometres from the municipal limits of these cities.	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)
Residential unit comprised	30 SQMTR Buildup Area-Metro Cities   60 SQMTR-Others	Build Up Area Word has been substituted with Carpet Area	60 SQMTR Carpet Area-Metro Cities   90 SQMTR-Others
Condition of Stamp Duty Valuation	NA	NA	does not exceed Rs 45 Lakhs

Description of Section 80-IBA: –

Prior to Section 80-IBA, the deduction w.r.t Business Profit and Gains derived from development of housing project commenced from 1^st Oct 1998, was dealt with Section 80-IB(10)

Brief of 80-IB(10) are as follows:-

If Project was approved by Local Authority: –

• Before 01/04/2004 the it would required to be completed on or before 31^st March 2008.
• Between 01/04/2004 to 31/03/2005, then within 4 years from the end of the financial year in which the housing project is approved by the local authority.
• On or after 01/04/2005, then within 5 years from the end of the financial year in which the housing project is approved by the local authority.

1. Project Size in area: Minimum 1 acre (4840 Sq Yards).
2. Not applicable on housing project carried out in accordance with a scheme framed by the Central Government or a State Government for reconstruction or redevelopment of existing buildings in areas declared to be slum areas under any law for the time being in force and such scheme is notified by the Board in this behalf.
3. Residential Area: Max build-up area 1000 SQFT. for Cities in Delhi or Mumbai or within twenty-five kilometres from the municipal limits of these cities & 1500 SQFT for other places.
4. Shops & Other Commercial Area: Max three per cent of the aggregate built-up area of the housing project or 5000 SQFT, whichever is higher.
5. 1 Individual (incl. Spouse, minor & HUF In case of Karta & Representative Assessee of individual, spouse, minor & HUF in case of Karta)= 1 Residential Unit.

Section 80-IBA

(In Case of Gross Total Income Includes: -Any Business Profits from developing/building housing projects whether for rental or not.)-Not applicable for Work-Contractor.

Date of Approval: – Date of First Building Plan Approval (1^St Proviso of 80IBA(2)(b)).

Date of Completion: – Date of Completion Certificate for whole Project (2^nd Proviso of 80IBA(2)(b)).

Prerequisites to Qualify Project as Housing Project: –

Housing Project means a project consisting predominantly of residential units with such other facilities and amenities as the competent authority may approve subject to below mentioned provisions: –

1. Minimum Land Area for Project— 1000 SQMTR, for Metro Cities*or 2000 SQMTR, for other Places.
2. The project is approved by the competent authority between 1^st June 2016 to 31^st March 2022.
3. Completion of Project Received within 5 Years from date of approval.
4. The Carpet Area of Commercial Establishments (incl. Shops) does not exceed 3% of the Aggregate Carpet Area
5. The carpet area of the residential unit does not exceed 60¹ SQMTR for Metro Cities*, 90¹ SQMTR for Other Places.
6. The stamp duty value of a residential unit does not exceed Rs 45 Lakhs (for Projects commenced after 1^st Sep 2019).
7. 1 Individual (incl. Spouse & minor son)=1Residential Unit
8. The project utilises—Minimum permissible FAR 90%for metro cities* and 80% for other places.
9. ProjectWise Separate books of account need to be maintained.

______________

1: Before 1^st Sep 2019:- 30¹ SQMTR for Metro Cities*, 60¹ SQMTR for Other Places

*Metro Cities: For Project commenced: –

On or after 1^st Sep 2019: –

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).

Before 1^st Sep 2019:-Chennai, Delhi, Kolkata or Mumbai.

Other Points:-

1. If any Business profits and gains from developing/ building housing projects is claimed and allowed under this section for any assessment year, deduction to the extent of such profit and gains shall not be allowed under any other provisions of this Act.
2. In case of Failure to Complete within given time limit: –

The total amount of deduction so claimed and allowed in one or more previous years, shall be deemed to be the income of the assessee chargeable under the head “Profits and gains of business or profession” of the previous year in which the period for completion so expires.

Some Extracts from Sec. 80-IB & 80-IBA

Particulars	As per 80-IB	As per 80-IBA	Any Remark
Assessee Covered	Undertaking	Any Assessee
Minimum Area	1 Acre (4046.86 Sq Mtr)	1000/2000^ Sq Mtr.	^For Cities in Metro/Others
Period of Completion: – For Approved Projects a. Before 01/10/1998	–	–	No Proviso for Housing Projects approved after 31/03/2022.
b. 01/10/1998 to 01-04-2004	Before 31/03/2008	–
c. From 01/04/04 to 31/03/05	Within 4 Years	–
d. From 31/03/05 to 31/05/16	Within 5 Years	–
e. From 01/06/16 to 31/03/22	–	Within 5 Years
Residential Unit measured in	Build-Up Area	Carpet Area	W.e.f., 01/04/2018
Individual includes for 1 Residential Unit.	Spouse, Minor Child, HUF In case of Karta, Representative Assessee of above.	Spouse, Minor Child
Not Applicable on	Development by CG/SG at notified slum areas.	–

Relevant Definitions for Section 80IBA

• Carpet area means the net usable floor area of an apartment, excluding the area covered by the external walls, areas under services shafts, exclusive balcony or verandah area and exclusive open terrace area, but includes the area covered by the internal partition walls of the apartment.
• Competent authority means the authority empowered to approve the building plan by or under any law for the time being in force.
• Floor Area Ratio (FAR) means the quotient obtained by dividing the total covered area of plinth area on all the floors by the area of the plot of land.
• Rental Housing Project means a project which is notified by the Central Government in the Official Gazette under this clause on or before the 31st day of March 2022 and fulfils such conditions as may be specified in the said notification.
• Residential unit means an independent housing unit with separate facilities for living, cooking and sanitary requirements, distinctly separated from other residential units within the building, which is directly accessible from an outer door or through an interior door in a shared hallway and not by walking through the living space of another household.
• Stamp duty value means the value adopted or assessed or assessable by any authority of the Central Government or a State Government for the purpose of payment of stamp duty in respect of an immovable property.

Some Relevant Judicial Rulings on Section 80IBA: –

1.		CIT v. Radhe Developers &Ors. 2012 (341) ITR 403 Guj.
		The Hon’ble Gujarat High Court held that “Neither the provisions of s. 80-IB nor any other provisions contained in other related statutes were brought to our notice to demonstrate that ownership of the land would be a condition precedent for developing the housing project. It was perhaps not even the case of the Revenue that under the other laws governing construction in urban and semi-urban areas, there was any such restriction. It is, however, the thrust of the argument of the Revenue that in order to receive benefit under s. 80-IB(10) of the Act, such requirement must be read into the statute. We cannot accept such a contention. Firstly, as already noted, there is nothing under s. 80-IB(10) of the Act requiring that ownership of the land must vest in the developer to be able to qualify for such deduction. Secondly, term developer has been understood in common parlance as well as in legal sense carrying a much wider connotation.”
2.		ACIT (OSD) v. M/s. Someshwara Developers 2013 (10) TMI 281
		The Hon’ble Supreme Court has dismissed the SLP of the Department in case of ACIT (OSD), Baroda Vs. M/s. Someshwara Developers arising from the judgment and Order dated 11-1-2012 in ITA No. 1300/2008 of the Hon’ble Gujarat High Court following the decision of Radhe Developers. Thus the SLP against the order in case of Radhe Developers case of the Hon’ble Gujart High Court has been dismissed by the Supreme Court.
3.		Dy. CIT v. Sobha Developers [2015] 58 taxmann.com 107 (Bang. – Trib.)
		Land on which said project was carried out by assessee belonged to another sister company, STP, which had purchased land from owners and had an arrangement with assessee for development to be carried out over land assessee. STP as owner of land wholly conveyed share of undivided interest in land over which project was developed by assessee and sold to prospective purchasers of flats taking from assessee. Consideration payable by purchasers for undivided share of land would be appropriated to STP and assessee. It was held that assessee would be entitled for deduction under section 80-IB.
4.		CIT v. Vishal Developers [2014] 52 taxmann.com 514 (Guj.)
		Assessee entered into a development agreement with co-operative Housing Societies and was given possession of land for construction of Housing units. The assessee claimed deduction at 100 per cent of its profits under section 80-IB(10). AO found that assessee was not owner of land but land was in name of said society, accordingly, he concluded that assessee was not both, a developer and builder, as required by said section and did not fulfil the condition of said section. It was held that where assessee had taken full responsibility for execution of development project and assessee had borne entire cost of construction, it was developer and builder of housing project and there being nothing under section 80-IB(10) requiring that ownership of land must vest in developer to be able for such deduction, the assessee was entitled for deduction.
5.		CIT v. Mangala Properties (P.) Ltd. [2015] 57 taxmann.com 35 (Guj.)
		The assessee entered into development agreement with land owners and constructed a housing project at its own risk and cost. It was held that assessee was entitled to benefit under section 80-IB even when title of lands had not been passed to assessee.
6.		CIT v. Shreeji Developers [2013] 37 taxmann.com 272 (Guj.)
		In order to claim deduction under section 80-IB(10), it is not necessary that developer of housing project should be owner of land.
7.		CIT v. Shreenath Infrastructure [2014] 44 taxmann.com 461 (Guj.)
		Deduction under section 80-IB(10) claimed by assessee-developer is allowable to it even though assessee is not owner of land and even permission for construction was granted in favour of erstwhile owner and nature of agreement between assessee and unit purchasers shows that it is only a ‘works contract’.
8.		Sky Builders & Developers v. ITO [2011] 14 taxmann.com 78 (Ind. – Trib.)
		Where assessee sold plots to respective customers by registering a sale deed and thereafter assessee constructed building at an agreed price, it had to be concluded that assessee merely acted as building contractor and not as a developer and, therefore, assessee’s claim for deduction under section 80-IB(10) could not be allowed.
9.		Abdul Khader v. Asstt. CIT [2012] 23 taxmann.com 176 (Bang.)
		It is not necessary that for claiming the deduction under section 80-IB(10), construction has to be carried on by the assessee.