Section 80IBA - Deduction for Affordable Housing Projects

In view of promoting the affordable housing projects in India, the Finance Minister Shri. Arun Jaitley introduced the section for tax benefits for the builders promoting affordable housing schemes. Section 80IBA deals with 100% deductions for the builders promoting affordable housing schemes subject to fulfilment of the conditions as mentioned therein.

Following is the brief analysis of the provisions mentioned in the section.

The assessee engaged in developing and building the housing projects shall get deduction equal to 100% of profits and gains of such business from the gross total income. This is subject to conditions mentioned below.

Approval of Project

The project should be approved after 1st June, 2016 be on or before 31st March, 2019. The projects approved within this period are eligible for the said deduction.

Completion of Project

The project should be completed within a period of three years from the date of its approval by the competent authority. However, if an approval is obtained for the same project more than once, the period of three years shall be calculated from the date of first approval. Also, the project shall be deemed to be completed on obtaining of completion certificate from the competent authority for the whole such project.

Area of Project

The section requires that the plot of land on which such housing project is proposed shall meet the minimum criteria for area. In the cities of Chennai, Delhi, Kolkata and Mumbai, the minimum size of plot of land shall be 1000 square meters (10763.91 square feet), whereas in other cities the minimum size of plot of land shall be 2000 square meters (21527.82 square feet). The projects of plot area less than these mentioned are not eligible for the deduction.

Built up area of residential unit in such project

The section also provides for the built up area of a residential unit in such project. In the cities of Chennai, Delhi, Kolkata and Mumbai, the built up area of a residential unit shall not exceed 30 square meters (322.917 square feet) and in other cities such area shall not exceed 60 square meters (645.835 square feet).

The built up area of a residential unit means the inner measurement of the residential unit at the floor level which includes balconies and projections and as increased by the thickness of the walls. However, it shall not include the common areas shared with other residential units.

Each such independent residential unit should include the facilities for living, cooking and sanitary requirements. Such unit should be directly accessible from an outer door or inner door of a common hallway. There should not be an access to a residential unit from a living area of another residential unit.

Floor Area Ratio

The section also provides for utilization of the permissible floor area ratio (also called as floor space index). In the cities of Chennai, Delhi, Kolkata and Mumbai the project shall utilize at least 90% of the permissible floor area ratio. In other cities, such utilization shall be at least 80% of the permissible floor area ratio.

Other Conditions

The other conditions for claiming deduction under this section are mentioned below.

  • The assessee shall maintain separate books of accounts for each such project.
  • The built up area of shops and commercial units in such project shall not exceed 3% of the aggregate built up area.
  • The project is only housing project on the plot of land. There shall not be more than one housing project on each plot.
  • Where a residential unit is allotted to a person in the project, no such unit shall be allotted to the spouse of such person or to the minor children of such person.
  • The section is not applicable to works contractor who is executing such project, either from Central Government of State Government of any other person.

Considering the benefits of this section, there will be a considerable increase in promoting of such housing project that shall contribute to the affording housing policy of the Government of India.

The author can also be reached at amolgkabra@gmail.com

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Amol Gopal Kabra (CA,CS,DISA) 
on 05 January 2017

Published in Income Tax
Views : 4290






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