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. 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.

80IBA - Affordable housing Project

100% section 80IBA deduction for profit & gain derived from Construction business :

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

(1) Any assessee (may be an individual, HUF, AOP, BOI, firm, company or any other person) can claim deduction under this section. The assessee has derived profit from the business of developing and building a housing project. (i.e. a project consisting predominantly of residential unit with such other facilities and amenities as the competent authority may specify)

“Housing project” means a project consisting predominantly of residential units with such other facilities and amenities as the competent authority may approve subject to the provisions of this section

“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.

(2) The project is approved by the competent authority after 01-06-2016 but on or before 31- 03-2020.

Please note that where the approval in respect of a housing project is obtained more than once, the date of first approval should be taken as the date of approval of the project.

(3) The project must be completed within a period of five years from the date of approval by the competent authority

The project will be deemed to be completed where certificate of completion in obtained from competent authority in writing.

(4) The carpet area of the shops and other commercial establishments included in housing project cannot exceed 3% of aggregate carpet area

(5) 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.

(6) The assessee maintains separate books of accounts in respect of the housing project.

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

If Project is Approved Prior to 1st September, 2019

Location of project Area of plot of land on which project is situated Carpet area of the residential unit Project Utilization of Floor area ratio
Where project is located within cities of Chennai, Delhi, Kolkata or Mumbai Not less than 1,000 square metres Not to exceed 30 square metres Not less than 90% permissible under rules made by Government or local authority
Where the project is located in any other place Not less than 2,000 square metres Not to exceed 60 square metres Not less than 80% permissible under rules made by Government or local authority

If Project is Approved On or After to 1st September, 2019

Location of project Area of plot of land on which project is situated Carpet area of the residential unit Project Utilization of Floor area ratio
Where project is located 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 1,000 square metres Not to exceed 60 square metres Not less than 90% permissible under rules made by Government or local authority
Where the project is located in any other place Not less than 2,000 square metres Not to exceed 90 square metres Not less than 80% permissible under rules made by Government or local authority

Note: The stamp duty value of a residential unit in the housing project does not exceed forty-five lakh rupees (This condition is applicable only if the housing project is approved on or after 1st September, 2019)

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.

Republished with Amendments

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14 Comments

  1. Naveen says:

    Hi, iam an salaried, i purchased a plot and to be built, Plot is in Bangalore and i built residential purpose, iam an eligible for take benift of 80iba, pl share.

  2. 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

  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. 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?

  9. 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 ?

  10. 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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