Section 80IBA of Income Tax Act with Alternate Minimum Tax

This article will cover in depth details of conditions to be satisfied before availing deduction under section 80- IBA alongwith some practical issues faced by assesses. Also this article will cover the claused related to Alternate Minimum Tax (AMT) under section 115JC from view point of LLP

Section 80IBA – Deduction of 100% profits to Affordable Housing Projects

Where the gross total income of an assessee includes any profits and gains derived from the business of developing and building housing projects, there shall, subject to the provisions of this section, be allowed, a deduction of an amount equal to hundred per cent (100%) of the profits and gains derived from such business.

Conditions to be satisfied by housing projects for Section 80IBA Deduction

The housing project must satisfy the following conditions to claim benefit under Section 80IBA.

1. The project must be approved by 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.

2. 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.

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

4. If an individual is allotted a residential unit in the project, no other unit should be allotted to the;

• same individual
• spouse of the individual
• minor children of such individual

5. Separate books to be maintained for such project.

6. Condition pertaining to Plot size, area of residential units and utilisation of permissible floor area ratio are as under:

If Project is Approved Prior to 1st September, 2019

Particulars	Metro Cities	Non- Metro Cities
Location	Where project is located within cities of Chennai, Delhi, Kolkata or Mumbai	Where the project is located in any other place
Plot size of land	Plot size of land should not be less than 1000 square metres	Plot size of land should not be less than 2000 square metres
Carpet area of the residential unit	Does not exceed 30 square metres	Does not exceed 60 square metres
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

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

Particulars	Metro Cities	Non- Metro Cities
Location	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)	Where the project is located in any other place
Plot size of land	Plot size of land should not be less than 1000 square metres	Plot size of land should not be less than 2000 square metres
Carpet area of the residential unit	Does not exceed 60 square metres	Does not exceed 90 square metres
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

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)

Illustration :

Particulars	Project Eligible u/s 80-IBA	Other Project	Total Income
Gross Total Income	100.00	100.00	200.00
Less : Deduction u/s 80-IBA	100.00	0	100.00
Net Profit	0	0	100.00

7. If the project is not completed within 3 years from the date of approval, the profits which were allowed as deduction under this section shall be deemed to profits of the year in which  such time limit of completion expires.

For Example, Project was approved on 01.07.2016 than the project should be completed on or before 30.06.2021. If not completed before 30.06.2021 than deduction claimed u/s 80-IBA was taxed in FY 2021-22.

8. Nothing contained in this section shall apply to any assessee who executes the housing project as a works-contract awarded by any person (including the Central Government or the State Government).

Meaning of Other Terminology used in Section 80IBA :

A. “competent authority” means the authority empowered to approve the building plan by or under any law for the time being in force

B. “floor area ratio” 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

C. “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

D. “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 and interior door in a shared hallway and not by walking through the living space of another household’.

E. “carpet area” (As defined in clause(k) of section 2 of RERA,2016) means the net usable floor area of an apartment, excluding the area covered by the external walls, areas under services shafts, exclusive balcony or veranda area and exclusive open terrace area, but includes the area covered by the internal partition walls of the apartment.

Explanation : For the purpose of this clause, the expression “exclusive balcony or veranda area” means the area of the balcony or veranda, as the case may be, which is appurtenant to the net usable floor area of an apartment, meant for the exclusive use of the allottee; and “exclusive open terrace area” means the area of open terrace which is appurtenant to the net usable floor area of an apartment, meant for the exclusive use of the allottee;

F. “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.

FAQs on Deduction under Section 80IBA

1. Project is completed within 5 years but Flats are sold after 10 years, will Section 80IBA deduction be allowed?

Solution: – Yes, because there is limit on completion of project not on sale of flats of project, flats can be sold at anytime.

2. When 1 residential unit is allotted to an individual and can second be transferred to parents and major children?

Solution: – Yes, because condition is only for the individual himself/herself or the spouse or the minor children of such individual.

3. Where issue of Completion Certificate is delayed by Municipal Authority, Will Section 80IBA deduction be allowed?

Solution: – Deduction U/s. 80IBA cannot be denied for mere delay in issue of completion certificate by Municipality.

4. Whether deduction under section 80-IBA will be eligible for dwelling or duplex units or row houses?

Solution: – Section 80-IBA clearly mentioned the definition of residential house property, which state that the residential house property means an independent housing unit with separate facilities for living, cooking and sanitary requirements, distinctly separated from other residential units within the building.

Dwelling or duplex units or row houses are satisfying the conditions stated above and hence they are eligible for deduction under section 80-IBA.

5. Whether the residential property having carpet area of 80 square metres will be eligible for deduction under Section 80-IBA?

Solution: – Assuming in the given case, the project is approved on or after to 1st September, 2019. As the conditions for availing the deduction under Section 80-IBA is clearly stated that, the carpet area of residential property shall not exceed 60 square metres in case where the 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) or 90 square metres where the project is located in any other place.

Therefore, in the given case since the carpet area is of 80 square metres the deduction under section 80-IBA will be allowed only if residential property is situated in other places.

6. If in case the permission of the project is taken after 1^st June, 2016 but due to some problem the project was not able to start and therefore it was scrapped and a new revised permission is taken from the competent authority, can assessee will be eligible to claim the deduction under section 80-IBA?

Solution: – Section 80-IBA clearly states that the project must be approved by competent authority after 01-06-2016 but on or before 31-03-2020 and 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.

In the given case, since the approval is taken twice for the same project, the date of approval will be considered as first approval date which is after 01^st June, 2016 and therefore the assessee will be eligible for deduction under section 80-IBA.

Alternate Minimum Tax – Section 115JC

(Provisions explained for LLP as an example)

Applicability of Section 115JC:

It should have claimed deduction under

• chapter VI heading C ( Deductions in respect of certain incomes except u/s 80P) or
• under section 10AA ( Profit derived by SEZ Units) or
• Section 35AD ( Deduction for expense on specified business)
• The relief of Adjusted Total Income exceeds Rs 20 Lakhs is not available to LLPs.

Rate of AMT under Section 115JC:

Adjusted Total Income	Tax Rate
Upto Rs 1 crore.	19.24%
Exceeds Rs 1 crore.	21.5488%

Computation Of Adjusted Total Income:

Total Income of the assessee under normal provisions of the Act	xxx
ADD:
Deduction claimed under Chapter VI heading C ( 80 H to 80 RRB except u/s 80P )	Xxx
Deduction claimed under section 10AA	Xxx
Deduction claimed under section 35AD	Xxx
LESS:
Depreciation allowed u/s 32 of the Act as if no deduction u/s 35 AD in respect of such assets was allowed.	(Xxx)
Adjusted Total Income	Xxx

Credit & carry Forward of AMT:

AMT is payable if the normal tax liability is less than the AMT liability (AMT> Normal Tax).

If in any year AMT is payable then the difference between the Normal Tax Payable and AMT paid is allowed as AMT Credit and can be adjusted with normal tax liability in subsequent/ future year in which the normal income tax payable exceeds the AMT.

AMT Credit can be carried forward upto 10 years. (15 years w.e.f 01-04-2018)

Report for AMT:

As per section 115JC of the Income Tax Act, 1961, an assessee is liable to AMT should obtain a report in Form No- 29C prescribed under Rule 40BA from CA certifying the adjusted total income and the alternate minimum tax duly computed and furnish the report on or before the due date of filing the return u/s 139(1).

Note :

MAT Credit of Company is not allowed to be carried forward in the hands of LLP on conversion of Company into LLP.

Example on Computation of AMT:

A LLP in AY 2019-20 having total income of Rs 40 lakhs and has claimed deduction under Chapter VI A heading C of Rs 30 lakhs.

Normal Tax Calculation:

Total Income :	40 lakhs
Less Deduction u/c VI A heading c:	30 lakhs
Taxable Income:	10 lakhs
Tax Payable @31.2%	3.12 lakhs

AMT Calculation:

Adjusted Total Income:

Taxable Income under normal Tax Provisions:	10 Lakhs
Add: Deduction u/c VI A heading c:	30 Lakhs
Adjusted Total Income:	40 Lakhs
AMT Payable @ 19.24%	7.696 Lakhs

Since AMT payable is more than the Normal Tax Payable, the assessee will pay tax of Rs 7.696 lakhs. However, he will get tax credit of Rs 4.576 Lakhs (7.696-3.12) which can be carried forward and set off upto AY 2034-35.(i.e 15 years)

Now, suppose in next year the assessee has total income of Rs 50 lakhs and deduction u/c VI A heading C is Rs 5 lakhs, then:

Normal Tax Calculation:

Total Income :	50 Lakhs
Less Deduction u/c VI A heading c:	5 Lakhs
Taxable Income:	45 Lakhs
Tax Payable @31.2%	14.04 Lakhs

AMT Calculation:

Adjusted Total Income:

Taxable Income under normal Tax Provisions:	45 Lakhs
Add: Deduction u/c VI A heading c:	5 Lakhs
Adjusted Total Income:	50 Lakhs
AMT Payable @19.24%	9.62 Lakhs.

Since, the Normal Tax Payable is more than the AMT payable, the assessee will pay the Normal tax of Rs 14.04 Lakhs. Also, the assessee will get AMT credit OF 4.42 lakhs (14.04 – 9.62 ) available to it out of Rs 4.576 Lakhs.

(The author can be reached at harshil.shah796@gmail.com)

(Republished with Amendments)