Deductions in respect of profits and gains from housing projects [New Section 80-IBA]

Effective from: A.Y.2017-18

(i) Objective:
In order to provide impetus to affordable housing sector to achieve the larger objective of ‘Housing for All’, new section 80-IBA has been inserted.

(ii) Quantum of deduction:

Where the gross total income of an assessee includes any profits and gains derived from the business of developing and building housing projects, an amount equal to 100% of the profits and gains derived from such business is allowable as deduction under new section 80-IBA, subject to fulfilment of certain conditions.

(iii) Conditions to be fulfilled for claim of deduction:

(a) the project is approved by the competent authority between 1st June, 2016 and 31st March, 2019;

(b) the project is completed within a period of three years from the date of approval by the competent authority:

However, in a case where the approval in respect of a housing project is obtained more than once, the project shall be deemed to have been approved on the date on which the building plant of such housing project was first approved by the competent authority and the project shall be deemed to have been completed when a certificate of completion of project as a whole is obtained in writing from the competent authority.

(c) the built-up area of the shops and other commercial establishments included in the housing project does not exceed 3% of the aggregate built-up area;

(d) 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;

(e) Conditions relating to size of plot of land, residential units etc.

	Location of the housing project	Size on plot of land on which the project is located	Built-up area of the residential unit comprised in the housing project	Percentage of floor area ratio to be utilised by the project
(1)	(2)	(3)	(4)	(5)
(i)	Within the cities of Chennai, Delhi, Kolkata or Mumbai or within the distance, measured aerially, of 25 kms from the municipal limits of these cities	Not less than 1,000 sq. m.	Not more tha 30 sq.m.	Not less than 90% of the floor area ratio permissible in respect of the plot of land under the rules to be made by the Central Government or the State Government or the local authority, as the case may be.
(ii)	In any other place	Not less than 2,000 sq.m.	Not more than 60 sq.m.	not less than 80% of such floor area ratio

 

(f) The project is the only housing project on the plot of land [referred to in column (3)].

(g) the assessee maintains separate books of account in respect of the housing project.

 

(iv) No deduction for person executing the housing project as a works contract:

An assessee who merely executes the housing project as a works-contract awarded by any person (including the Central Government or the State Government) would not be eligible for deduction under this section.

(v) Consequence of non-completion of housing project within 3 years:
In a case where the housing project is not completed within the period of three years from the date of approval by the competent authority and in respect of which a deduction has been claimed and allowed under this section, the total amount of deduction so claimed and allowed in one or more previous years, shall be deemed to be the income of the assessee chargeable under the head “Profits and gains of business or profession” of the previous year in which the period for completion so expires.

(vi) No deduction under any other provision of the Act in respect of such profits:

Where any amount of profits and gains derived from the business of developing and building housing projects is claimed and allowed under this section for any assessment year, deduction to the extent of such profit and gains shall not be allowed under any other provision of this Act.

(vii) Meaning of certain terms:

	Term	Meaning
(a)	Built-up area	The inner measurements of the residential unit at the floor level,  including – • projections and balconies,  as increased by – • the thickness of the walls,  However, built-up area does not include – • the common areas shared with other residential units, and • any open terrace so shared
(b)	Competent authority	The authority empowered by the Central Government to approve the building plan by or under any law for the time being in force.
(c)	Floor area ratio	The quotient obtained by dividing the total covered area of plinth area on all the floors by the area of the plot of land
(d)	Housing project	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
(e)	Residential unit	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.