CA Amar Girishkumar Oza

CA Amar Girishkumar Oza

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.

Disclaimer: The contents of this article are for information purposes only and does not constitute advice or a legal opinion and are personal views of the author. It is based upon relevant law and/or facts available at that point of time and prepared with due accuracy & reliability. Readers are requested to check and refer to relevant provisions of statute, latest judicial pronouncements, circulars, clarifications etc before acting on the basis of the above write up.  The possibility of other views on the subject matter cannot be ruled out. By the use of the said information, you agree that Author / TaxGuru is not responsible or liable in any manner for the authenticity, accuracy, completeness, errors or any kind of omissions in this piece of information for any action taken thereof. This is not any kind of advertisement or solicitation of work by a professional.

(Republished with Amendments by Team Taxguru)

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14 Comments

  1. Radha krishnan G says:

    Dear Sir,
    is the tax benefit offered by the govt under section 80IBA includes the profit out of construction of MIG-I and MIG-II houses constructed under PMAY CLSS scheme

  2. Biswajit Mazumder says:

    Suppose Mr. X is paying, but he want to take the property at the name of his wife name(1st applicant) and Son(2nd applicant).
    He does not want his name in property.
    Is it possible?

    1. Loveleen kaur says:

      The section says an individual can not have more than one unit.
      neither in 1.) His/Her name
      2.) in the name of Spouse.
      3.) In the name of a minor child.
      And there is no restriction as mentioned , one can be paying and have the Flat in the name of wife and son as a second applicant.

      Hope it helps!!!!

  3. Murali S says:

    Sir,

    If land owner by an LLP, which would like to give for JDa could LLP get the benefit of 80-IBA? Else, could LLP transfer the LAND to designated partner and the designated partner give for JDA and get the benefit of 80-IBA.

    Please suggest.
    Thanks and Regards,

    1. PRAKASH REDDY says:

      Good morning sir. Section 80iba applicapable for joint Develepment venture with land lords. In this case developer and land lord both get the benefit or not . Any preyeer intimation to give it dept regaRDIND THIS PROJECT PL INFORME

  4. Sumit Bhansali says:

    Dear Girishkumar Sir
    Can you please clarify regarding the term ‘muncipalty limits’ in Sec 80-IBA for non metro cities, Does it mean only muncipal coorporation or Muncipal council too validates for such excemption of income generated in a project by a builder.

  5. Gaurav says:

    I have a few queries
    1. Who is the competent authority for assessing sec 80 Iba and availing benefit.
    2. Can the project be a part of a bigger approved project (phase wise assessment of tax)
    3. If there are co-developers what will be the scenario.

  6. CA Prashant Agale says:

    The article is incomplete and factually incorrect. It is not proper to say that Income is tax free. AMT or MAT, as applicable, will still apply. Govt should have exempted the Assessee claiming tax breaks u/s 80IBA from AMT or MAT

  7. Satya Sai says:

    Prasad

    I have a similar question as Prasad Upadhyay.

    Could you please write to me if you got any info on competent authority or how to approach it.

  8. Prasad Upadhayay says:

    Hello,

    I just want to know the Competent Authority for Approval.. In our case, our companiy is initiatint a Housing project in Malur, Bangalore. But we dont know to whom we need to approach for approval, so that we can get deduction in respect Section 80-IBA.

    1. vinay says:

      Act is clear and conditions to be satisfied on Authority for approval – means authority to approve the Sanction Plan of Project – say BDA/ BBMP / BMRDA / BIAPPA in Bangalore
      DTCP in other Locations

      where is the confusion ?

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