Section 80IB(10) allows 100% of the profits as deduction from a housing project, provided it complies with various conditions stipulated therein. The said section provided that the housing project should be completed on or before the 31st March, 2008 (for projects for which the approval was granted prior to 1.4.2004) or before expiry of a period of 4 years from the date of approval (in cases where the approval was granted after 1.4.2004).
It is proposed to give one additional year for completion of the project. It has accordingly been provided that the projects approved prior to 1.4.2004 will have to be completed on or before 31.3.2008 (i.e. 4 years limit). Projects approved after 1.4.2004, but before 31.3.2005, will have to be completed on or before 31.3.2010. For projects which are approved on or after 1.4.2005 will have to be completed before expiry of 5 years from the end of the year in which the approval is given.
To further relax the rigours of the conditions stipulated in section 80IB(10)(d) relating to the quantum of permissible commercial construction, some amendments have been proposed. Existing provisions allows deduction only if the built-up area of shops and other commercial establishment included in the housing project does not exceed 5% of the aggregate built-up area or 2000sq.ft. whichever is less. It is proposed to relax this condition by providing that the maximum commercial construction permissible will be higher of 3% of the total built up or 5,000 Sq. Ft. whichever is more. The amendment brings about more logical meaning to the condition.
The proposed amendment is to be effective from A.Y. 2010-11. However, it leaves open the issue of commercial construction and also completion in cases where the profits have been charged to tax or where the deductions have been claimed for the period prior to A.Y. 2010-11. It is felt that giving effect to these provisions as proposed, prospectively; may result in some unintended inequity.
These amendments are proposed to take effect retrospectively from 1st April, 2010 and will, accordingly, apply in relation to the assessment year 2010-11 and subsequent years.