CA Pavan Jayaprakash

Pavan JayaprakashOverview: One of the biggest challenges faced by our growing economy in coming days is providing affordable housing, sanitation and a safe environment to the Citizens. Real estate prices have also skyrocketed over the past couple of decades leaving the common man with only dreams of owning a house. As per KPMG report the housing need is almost equally distributed in urban and rural areas in the range of 5 to 6 crore units.

The analysis of KPMG is given below:

KPMG Report extractPrime Minister envisioned Housing for All (HFA) by 2022 when the Nation completes 75 years of its Independence. In order to achieve this objective, Central Government has launched a comprehensive mission “Housing for All by 2022- Pradhan Mantri Awas Yojana.

However, making housing affordable is not an easy task. Around 20-30% goes in form of various taxes and fees such as Stamp duty, registration fees, service tax, Value added tax. Further, Real Estate Developers have to pay income tax of 30% for profit earned from constructions business.

100% deduction for profit & gain derived from Construction business :

To make purchase of house affordable and give tax incentives to Real Estate Developers Government in the current Union Budget 2016, have announced 100% deduction of the profits and gains derived from construction business, by insertion of new section 80 IBA of Income Tax Act, 1961. Following are the conditions under the scheme:

80IBA Conditions

Certain other conditions has been prescribed with respect to project size and residential unit as enumerated below:

Sl. No Metro* Non- Metro
Minimum size of Project Plot size of land should not be less than 1000 sq. mtrs. Plot size of land should not be less than 2000 sq. mtrs.
Residential unit Size Does not exceed 30 sq. mtrs. Does not exceed 60 sq. mtrs.
Project Utilization of Floor area ratio Not less than 90% permissible under rules made by Government or local authority Not less than 80% permissible under rules made by Government or local authority

Metro: Chennai, Delhi, Kolkata or Mumbai or within the area of twenty-five kilometers from the municipal limit of these cities.

Illustration: Bangalore is a non-metro city. Hence, plot size of land should not be less than 2000 sq. mtrs. Maximum residential size should not exceed 60 sq. mtrs.

Impact of non-compliance: In case where the housing project is not completed within the period specified, the total amount of deduction so claimed and allowed in one or more previous years, shall be chargeable to Tax under the head “Profits and Gains of Business or Profession” for the previous year in which for completion so expires.

Author Note: The Focus on Real estate has been kept intact, by giving various tax incentives to Real Estate Builder in the forms of exemption from service tax & Income tax to make housing sector affordable. Deduction limit has also been raised by 50,000/- for first time home buyers within overall limit ceiling limit on loan & price of property.

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Category : Income Tax (25341)
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Tags : Budget 2016 (435) Section 80IBA (7)

12 responses to “Decoding 80IBA: 100% tax deduction for affordable housing project”

  1. hiren says:

    in this 80 ib scheme a builder can sell a flat 2 same person in a family or if no then give a replay to whom we sell or whom we not or either company

  2. rajendra jain says:

    What is defination of NonMetro cities ?
    Our project is in Cherpoli village , Taluka – Sahapur Dist-Thane .
    Is our project eligible ?

  3. Murali S says:

    Sir,

    If land is held by LLP and LLP give it for JDA, can LLP get benefit of 80-IBA? Else, does LLP shall transfer Land to Designated partner and the designated partner give it for JDA to get benefit under 80-IBA.

    Please suggest.
    Thanks and Regards,

  4. Yogesh says:

    Maximum residential size should not exceed 60 sq. mtrs under this scheme, whether this is Super Builtup Area or Carpet Area of the unit ?

  5. Sanket Gala says:

    what if we have a plot of 1700 sq mtr and we took c.c in march 2017 and took the adjourning plot of 1900 sq mtr . So the total plot size is now 3600 sq mtr . we have amalgamated the plot and now received revised c.c in may 2017 . The work of the full project will start now . so will we get deduction in 80IBA .

  6. L. Devarajulu Naidu says:

    If the project utilises 80% of FAR for housing units below 60 Square meters, and 20% FAR utilises for bigger size of housing units, will it get exemption under section 80IBA for 100% of profits or proportionate exemption.

  7. sudhish gokhale says:

    I have a plot of land measuring 2450 sq.meter but there is road in the center of the plot deviding it in 2 pieces. Iam building housing complex as required by section 80iba. The total area of the plot is inclusive of road. I am able to ask for 100% tax benefit? Road area is about 300 sq. Meters.

  8. Pramod Jain says:

    Hello Is this scheme valid for a builder building individual row houses with construction less than 60 sq meter.

  9. priyanka agrawal says:

    What if the property (builders property) on which the scheme is being executed is owned by 2 individual persons, ie there are 2 land owners of the property.
    Will both of them get the exemption of income tax under 80IBA?

    • Ar. Nafees Khan says:

      Yes.

      Since the developer has to maintain separate books of account for the project, “profits and gains” shall be in respect of the project. Income tax shall be waived off with respect of the project for all the stakeholders.

      Architect Nafees Khan,
      worksprogressive@gmail.com
      Navi Mumbai.

  10. Hemanth Patwari says:

    What if the property is purchased by 2 person or more from the same family ? Will the real estate companies be eligible for proportionate deduction from profits or will it become ineligible for the scheme u/s 80IBA ?

  11. CA.C.Maheshwar Reddy says:

    The proposal may be modified by extending the sq.mtr. Now a days every one is looking for double bed room which may required minimum built up area of 800 sq.feet. But in the proposal which is less than the required built up area. The same may be increased with the requirement of present needs.

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