Rationalisation of Provisions of Section 80-IBA to promote Affordable Housing

The existing provisions of section 80-IBA provides for 100% deduction in respect of the profits and gains derived from developing and building certain housing projects subject to specified conditions. The conditions specified, inter alia, include the limit of 30 square meters for the built-up area of residential unit in respect of project located in the Chennai, Delhi, Kolkata and Mumbai or within 25 kms from the municipal limits of these four cities. Further, it is also provided that in order to be eligible to claim deductions, the project shall be completed within a period of three years.

In order to promote the development of affordable housing sector, it is proposed to amend section 80-IBA so as to provide the following relaxations:—

(i) The size of residential unit shall be measured by taking into account the “carpet area” as defined in Real Estate (Regulation and Development) Act, 2016 and not the “built-up area”.

(ii) The restriction of 30 square meters on the size of residential units shall not apply to the place located within a distance of 25 kms from the municipal limits of the Chennai, Delhi, Kolkata or Mumbai.

(iii) The condition of period of completion of project for claiming deduction under this section shall be increased from existing three years to five years.

These amendments will take effect from 1st April, 2018 and will, accordingly, apply in relation to the assessment year 2018-19 and subsequent years.

[Clause 37]

Extract of relevant clause from Finance Bill, 2017

Amendment of section 80-IBA.

37. In section 80-IBA of the Income-tax Act [as inserted by section 44 of the Finance Act, 2016], with effect from the 1st day of April, 2018,—

(a) in sub-section (2),—

(i) in clause (b), for the words “three years”, the words “five years” shall be substituted;

(ii) in clauses (c) and (f), for the expression “built-up area” wherever they occur, the words “carpet area” shall be substituted;

(iii) the words “or within the distance, measured aerially, of twenty-five kilometres from the municipal limits of these cities” wherever they occur shall be omitted;

(b) in sub-section (6), for clause (a), the following clause shall be substituted, namely:—

‘(a) “carpet area” shall have the same meaning as assigned to it in clause (k) of section 2 of the Real Estate (Regulation and Development) Act, 2016.’.

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One Comment

  1. Dharam Shah says:

    If a land is given for Development in lieu of 50 percent of the constructed area to be recieved from the builder what will be the Income tax payable on such an agreement and when will it be liable to be paid…1 When the agreement is executed an registered? 2 When the constructed flats are recieved ? 3 When the flats which are recieved are sold? regards

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June 2021