According to the McKinsey Report (2010), India will have 40 per cent of its population living in urban areas with 68 cities with one million plus population (from 42 currently) by 2030 (Chart 2). It estimates that the demand for affordable housing will increase to 38 million housing units in 2030 from 19 million in 2012.

The Union Budget 2017-18 announced number of measures to boost affordable housing which includes Section 80-IAB which allowed 100% deduction on profits generated by developer or builder of affordable housing project.

This article tries to summarise provisions of Section 80-IAB of the Income tax act, 1961 introduced by Union Budget 2017-18.

Sr No Particulars   Details
1 Eligible Assessee 1. Proprietor
2. Partnership firm
3. Limited Liability Partnership
4. Private Limited Company
5. Trust
6. Association of Person (AOP)
7. Public Limited Company
8. HUF
2 Eligible Business Assessee engaged in the business of developing and building housing projects.
But section not applicable to assessee who executed housing project as a works-contract basis.
3 Approval of the Project The housing project should be approved by competent authority after 01 June 2016 but on or before 31 March 2019
4 Completion of construction The project should be completed within 3 years from the date of approval.
Certificate of completion should be obtained within 3 years from the date of approval.
5 Plot of Land – Mumbai, Chennai, Delhi and Kolkata 1000 Sq Mtr ( 10,700 sq ft)
Plot of Land – Other states 1000 Sq Mtr ( 20,400 sq ft)
6 Carpet area of each housing unit – Mumbai, Chennai, Delhi and Kolkata 30 Sq Mtr ( 325 sq ft)
Carpet area of each housing unit – Other states 30 Sq Mtr ( 645 sq ft)
7 Sale of Residential Unit 2 members of same family can not book / purchase 2 flats in that residential housing project. i.e. one flat one family
8 Other conditions 90% floor area ration is required to be maintained for metro cities.
80% floor area ration is required to be maintained for non-metro cities.
9 If not completed within 3 years Deduction allowed earlier will be taxes in the fourth year after the date of approval.

Developers and Builders engaged in the construction of affordable housing project have this opportunity of earning tax free income.

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Qualification: CA in Practice
Company: N N M & ASSOCIATES
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