Presentation on section 80IBA of Income Tax Act (amended) along with Alternate Minimum Tax

Deduction of 100% profits to Affordable Housing Projects

Where the gross total income of an assessee includes any profits and gains derived from the business of developing and building housing projects, there shall, subject to the provisions of this section, be allowed, a deduction of an amount equal to hundred per cent (100%) of the profits and gains derived from such business.

Conditions to be satisfied by such housing projects :

The housing project must satisfy the following conditions to claim benefit under this section.

1. Main Conditions :

Particulars Metro Non- Metro
Location Chennai, Delhi, Kolkata or Mumbai or within the area of twenty-five kilometers (25 Kms) (removed w.e.f 1-4-2018) from the municipal limit of these cities. Within the Jurisdiction any Municipality or Cantonment board
Minimum size of Project Plot size of land should not be less than 1000 sq. mtrs. Plot size of land should not be less than 2000 sq. mtrs.
Residential unit Size Does not exceed 30 sq. mtrs. (322.91 Sq Feet) Does not exceed 60 sq. mtrs. (645.83 Sq Feet)
Project Utilization of Floor area ratio Not less than 90% permissible under rules made by Government or local authority  Not less than 80% permissible under rules made by Government or local authority

2. The project must be approved by competent authority after 01-06-2016 but on or before 31-03-2019.

  • 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 three years (replaced by five years w.e.f 01-04-2018) 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 shops and commercial built up area (replaced by carpet area w.e.f 01-04-2018) cannot exceed 3% of total built up area (replaced by carpet area w.e.f 01-04-2018) of the project.

5. If an individual is allotted a residential unit in the project, no other unit should be allotted to the;

  • same individual
  • spouse of the individual
  • minor children of such individual

6. Separate books to be maintained for such project.

Illustration :

Particulars Project Eligible u/s 80-IBA Other Project Total Income
Gross Total Income 100.00 100.00 200.00 
Less : Deduction u/s 80-IBA 100.00 0 100.00
Net Profit 0 0 100.00

7. If the project is not completed within 3 years from the date of approval, the profits which were allowed as deduction under this section shall be deemed to profits of the year in which  such time limit of completion expires.

For Example, Project was approved on 01.07.2016 than the project should be completed on or before 30.06.2021. If not completed before 30.06.2021 than deduction claimed u/s 80-IBA was taxed in FY 2021-22.

8. Nothing contained in this section shall apply to any assessee who executes the housing project as a works-contract awarded by any person (including the Central Government or the State Government).

Meaning of Other Terminology :

A. “built-up area” means the inner measurements of the residential unit at the floor level, including projections and balconies, as increased by the thickness of the walls, but does not include the common areas shared with other residential units, including any open terrace so shared;

B. “competent authority” means the authority empowered by the Central Government;

C. “floor area ratio” means 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” means a project consisting predominantly of dwelling units with such other facilities and amenities as the competent authority may specify subject to the provisions of this section;

E. “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 and interior door in a shared hallway and not by walking through the living space of another’.

F. “carpet area” (As defined in clause(k) of section 2 of RERA,2016) means the net usable floor area of an apartment, excluding the area covered by the external walls, areas under services shafts, exclusive balcony or veranda area and exclusive open terrace area, but includes the area covered by the internal partition walls of the apartment.

Explanation : For the purpose of this clause, the expression “exclusive balcony or veranda area” means the area of the balcony or veranda, as the case may be, which is appurtenant to the net usable floor area of an apartment, meant for the exclusive use of the allottee; and “exclusive open terrace area” means the area of open terrace which is appurtenant to the net usable floor area of an apartment, meant for the exclusive use of the allottee;

Note : Amendment by Budget is prospective not retrospective.

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