Section 80IBA provides a tax deduction for individuals who have gained profits from the business of building developing housing projects in the affordable housing segment. The key reason for the insertion of this section 80IBA is to incentivise the development of affordable housing for the promoters and builders of these products. In this article, we look at Section 80IBA in detail.
Also, read about Section 80EEA: Deductions for Affordable Housing
Section 80IBA of income tax act is applicable to any individuals who earn profits through housing project business.
Eligibility Criteria to Properties under Section 80IBA
There are certain conditions that the builder or developer has to satisfy, for availing the benefit of 100% tax-free income. The following are some of the conditions applies under section 80 IBA with respect to different types of housing projects.
- The taxpayer should have the profits earned from the business of building and developing housing projects. For example, any project developed for residential housing units with essential facilities and amenities to the buyers as specified by the competent or concerned authority is eligible.
- The carpet area of the commercial establishments and other shops included under the housing project should not exceed the limits of 3% of the aggregate carpet area.
- The following are the criteria regarding plot size, area of residential units and minimum utilisation of FAR (floor area ratio).
|S.No||Project Location||Area of Plot of Land in which project is situated||Carpet Area of Residential Units included in the Housing Project||Utilisation of Permissible Floor Area Ratio (FAR)|
|1.||Project is situated within the cities of Chennai, Delhi, Kolkata or Mumbai.||More than 1,000 square metres||Not exceeding 30 square meters||More than 90%|
|2.||Project is located in any other location.||More than 2,000 square metres||Not exceeding 60 square meters||More than 80%|
- In case of allocating residential unit in the housing project to an individual, no other residential unit in the housing project has to be allotted to the individual or the spouse or the minor children of such individual.
- The taxpayer should maintain separate books of account in respect of the housing project.
- The taxpayer should complete the project within a period of three years from the date of first approval by the competent authority. Therefore, the project would be considered as completed only when a certificate of project completion as a whole is required in writing from the concerned authority.
- The project should be approved by the concerned authority after June 1st, 2016, but on or before April 1st, 2020.
- In case of approval for the housing project is obtained more than once, the date of the approval obtained initially will be taken as the date of approval of the project.
Comparison of Section 80IB and Section 80IBA
|S.No||Particulars||Existing Section 80IB||Proposed Section 80IBA|
|1.||Approval||From local authority||From concerned authority|
|2.||Approval Duration||From October 1st,1998 to March 31st, 2008||From June 1, 2016, to April 1st, 2020|
|3.||Completion Period||Within the period of five years from the end of the financial year in which the housing project is approved from Local authority||Within the period of three years from the date of first approval by the competent authority|
|4.||Date of completion||The date in which completion certificate is issued by the local authority||The date when the certificate of completion of the project as a whole is obtained in writing from the concerned authority|
|5.||Commercial built-up area||Not exceeding 3% of the aggregate built-up area or 5000 sq ft. Whichever is higher||Not exceeding 3% of the aggregate built-up area|
|6.||Housing project||No such condition||Any project was consisting predominantly of dwelling units with specified facilities and amenities|
|7.||Residential Unit||No such condition||Any independent housing unit with separate facilities for cooking, living and sanitary requirements|
|8.||Books of Accounts||Maintenance of separate books of 738accounts not compulsory||Separate Books of accounts has to be maintained for the project|
- If the housing project is not completed within the specified period under section 80-IBA(2)(b) (i.e. three years) and in respect of which a deduction has been claimed, the total amount of deduction so obtained and allowed in one or more preceding years, would be considered as the chargeable income of the taxpayer under the head “Profits and gains of business or profession” of the preceding year in which the period for completion so expires.
- This deduction is not applicable to the taxpayer who completes the project as a work contract made under any individual or Central or State Government.