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.
Section
80-IBA of the Income Tax Act, 1961 as amendment by the Finance Act, 2016. This
section is on similar lines to the erstwhile section 80-IB (10).
Text of Section 80-IBA
[1][80-IBA. Deductions in respect of
profits and gains from housing projects.
(1) 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 of the profits and gains derived from such business.
[2][(1A)
Where the gross total income of an assessee includes any profits and gains
derived from the business of developing and building rental housing project,
there shall be allowed a deduction of an amount equal to hundred per cent of
the profits and gains derived from such business.]
(2)
For the purposes of sub-section (1), a housing project shall be a project which
fulfils the following conditions, namely: -
(a) the
project is approved by the competent authority after the 1st day of June, 2016,
but on or before the 31st day of March, [3][2022];
(b) the
project is completed within a period of [4][five] years from the date of
approval by the competent authority:
PROVIDED
that, -
(i) 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 plan of such housing project was
first approved by the competent authority; and
(ii) 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
[5][carpet]
area of the shops and other commercial establishments included in the housing
project does not exceed three per cent of the aggregate [6][carpet]
area;
(d) the project is on a plot of land measuring
not less than -
(i) one
thousand square metres, where the project is located within the cities of
Chennai, Delhi, Kolkata or Mumbai [7][***]; or
(ii) two thousand square metres, where the project
is located in any other place;
(e) the project is the only housing project on
the plot of land as specified in clause (d);
(f) the
[8][carpet]
area of the residential unit comprised in the housing project does not exceed—
(i) thirty
square metres, where the project is located within the cities of Chennai,
Delhi, Kolkata or Mumbai [9][***]; or
(ii) sixty square metres, where the project is
located in any other place;
(g) 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;
(h) the project utilises -
(i) not
less than ninety per cent 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, where the project is
located within the cities of Chennai, Delhi, Kolkata or Mumbai [10][***], or
(ii) not less than eighty per cent of such floor
area ratio where such project is located in any place other than the place
referred to in sub-clause (i); and
(i) the assessee maintains separate books of
account in respect of the housing project:
[11][PROVIDED
that for the projects approved on or after the 1st day of September, 2019, the
provisions of this sub-section shall have effect as if for clauses (d) to (i),
the following clauses had been substituted, namely: -
(d) the project is on a plot of land measuring
not less than -
(i) one thousand square metres, where such
project is located within the metropolitan cities of Bengaluru, Chennai, Delhi
National Capital Region (limited to Delhi, Noida, Greater Noida, Ghaziabad,
Gurugram, Faridabad), Hyderabad, Kolkata and Mumbai (whole of Mumbai
Metropolitan Region); or
(ii) two thousand square metres, where such
project is located in any other place;
(e) the project is the only housing project on
the plot of land as specified in clause (d);
(f) the carpet area of the residential unit
comprised in the housing project does not exceed -
(i) sixty square metres, where such project is
located within the metropolitan cities of Bengaluru, Chennai, Delhi National
Capital Region (limited to Delhi, Noida, Greater Noida, Ghaziabad, Gurugram,
Faridabad), Hyderabad, Kolkata and Mumbai (whole of Mumbai Metropolitan
Region); or
(ii) ninety square metres, where such project is
located in any other place;
(g) the stamp duty value of a residential unit in
the housing project does not exceed forty-five lakh rupees;
(h) 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;
(i) the project utilises -
(I) not less than ninety per cent 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, where such project is located within the metropolitan
cities of Bengaluru, Chennai, Delhi National Capital Region (limited to Delhi,
Noida, Greater Noida, Ghaziabad, Gurugram, Faridabad), Hyderabad, Kolkata and
Mumbai (whole of Mumbai Metropolitan Region); or
(II) not less than eighty per cent of such floor
area ratio where such project is located in any place other than the place
referred to in sub-clause (I); and
(j) the assessee maintains separate books of
account in respect of the housing project.]
(3)
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).
(4)
Where the housing project is not completed within the period specified under
clause (b) of sub-section (2) 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.
(5)
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 provisions of this Act.
(6)
For the purposes of this section, -
[12][(a) “carpet area” shall have the same meaning as
assigned to it in clause (k) of section 23 of the Real Estate (Regulation and
Development) Act, 2016 (16 of 2016);]
(b) “competent authority” means the authority
empowered to approve the building plan by or under any law for the time being
in force;
(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 residential units with such other facilities and amenities as
the competent authority may approve subject to the provisions of this section;
[13][(da) “rental housing project” means a project which
is notified by the Central Government in the Official Gazette under this clause
on or before the 31st day of March, 2022 and fulfils such conditions as may be
specified in the said notification;]
(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 an
interior door in a shared hallway and not by walking through the living space
of another household;]
[14][(f) “stamp duty value” means the value adopted or
assessed or assessable by any authority of the Central Government or a State
Government for the purpose of payment of stamp duty in respect of an immovable
property.]
KEY NOTE
1. Inserted by the Finance Act, 2016, with effect from 01.04.2017.
2. Inserted by the Finance Act, 2021, with
effect from 01.04.2022.
3. Substituted for “2021” by the Finance Act,
2021, with effect from 01.04.2022. Earlier “2020” was substituted for “2019” by
the Finance Act, 2019, with effect from 01.04.2020 and “2021” was substituted
for “2020” by the Finance Act, 2020, with effect from 01.04.2021.
4. Substituted for “three” by the Finance Act,
2017, with effect from 01.04.2018.
5. Substituted for “built-up” by the Finance
Act, 2017, with effect from 01.04.2018.
6. Substituted for “built-up” by the Finance
Act, 2017, with effect from 01.04.2018.
7. Words "or within the distance,
measured aerially, of twenty-five kilometres from the municipal limits of these
cities" omitted by the Finance Act, 2017, with effect from 01.04.2018.
8. Substituted for “built-up” by the Finance
Act, 2017, with effect from 01.04.2018.
9. Words “or within the distance, measured
aerially, of twenty-five kilometres from the municipal limits of these cities”
omitted by the Finance Act, 2017, with effect from 01.04.2018.
10. Words “or within the distance, measured aerially, of
twenty-five kilometres from the municipal limits of these cities” omitted by
the Finance Act, 2017, with effect from 01.04.2018.
11. Inserted by the Finance (No. 2) Act, 2019, with
effect from 01.04.2020.
12. Substituted by the Finance Act, 2017, with
effect from 01.04.2018. Prior to its substitution, clause (a) read as under :
'(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;'
13. Inserted by the Finance Act, 2021, with
effect from 01.04.2022.
14. Inserted by the Finance (No. 2) Act, 2019,
with effect from 01.04.2020.
Eligible Entities
The
entities in the business of developing and building housing projects.
Deduction
Available:
If
all the conditions are fulfilled, 100% of Profits and Gains derived from such
business.
Maintain
Separate Books of Accounts
The
assessee shall maintain separate books of accounts to avail the benefits of
this provision.
100% Deduction of Profit from Housing Projects [Section 80-IBA(1)]
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 100% of the profits and gains derived from such business provided the
project fulfils the conditions mentioned in section 80-IBA(2).
To
help migrant labourers and to promote affordable rental, the Finance Act, 2021
has allowed deduction by inserting sub-section (1A) under section 80-IBA also
to such rental housing project which is notified by the Central Government in
the Official Gazette and fulfils such conditions as specified in the said
notification.
100%
Deduction of Profit the Business of Developing and Building Rental Housing
Project [Section 80-IBA(IA)]
Where
the gross total income of an assessee includes any profits and gains derived
from the business of developing and building rental housing project, there
shall be allowed a deduction of an amount equal to 100%. of the profits and
gains derived from such business.
“Rental
housing project” means a project which is notified by the Central Government in
the Official Gazette under this clause on or before 31.03.2022 and fulfills
such conditions as may be specified in the said notification;’
Conditions
for Availing Deduction under
Section 80-IBA
There
are certain conditions that need to be fulfilled:
§
The
project should be completed within the specified time frame.
§
The
project should be sold to individual buyers and not to companies or firms.
§
The
project should not be transferred to any other person before the expiry of the
specified time frame.
Conditions
to be Fulfilled [Section 80-IBA(2)]
For
the purposes of section 80-IBA(1), a housing project shall be a project which
fulfils the following conditions, namely:-
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
(a) The project should be approved by the
competent authority after 01.06.2016, but on or before 31.03.2022;
(b) The taxpayer should complete the project is
completed within a period of 5 years from the date of approval by the competent
authority:
(i) 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 plan of such housing project was
first approved by the competent authority; and
(ii) 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 carpet area of the shops and other
commercial establishments included in the housing project does not exceed 3% of
the aggregate carpet area;
(d) the project is on a plot of land measuring
not less than -
(i) 1000 square metres
where such project is located within the cities of Chennai, Delhi, Kolkata or
Mumbai, or
(ii) 2000 square metres
where the project is located in any other place;
(e) the project is the only housing project on
the plot of land as specified in clause (d) above;
(f) the carpet area of the residential unit
comprised in the housing project does not exceed -
(i) 30 square metres
where such project is located within the cities of Chennai, Delhi, Kolkata or
Mumbai; or
(ii) 60 square metres,
where the project is located in any other place;
(g) 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;
(h) the project utilises -
(i) 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, where the project is located within the cities of Chennai, Delhi,
Kolkata or Mumbai, or
(ii) not less than 80% of such floor area ratio
where such project is located in any place other than the place referred to in
sub-clause (i); and
(i) the assessee should maintain separate books
of account in respect of the housing project.
Conditions
mentioned in clauses (d) to (i) of Section 80-IBA(2) have been substituted by
the following conditions in respect of projects approved on or after 01.09.2019
[Proviso to Section 80-IBA(2)]
The
Finance (No. 2) Act, 2019, with effect from 01.04.2020 has substituted the
conditions mentioned in clauses (d) to (i) of Section 80-IBA(2) by the
following conditions given in clauses (d) to (j) below in respect of projects
approved on or after 01.09.2019:
(d) the project is on a plot of land measuring
not less than -
(i) 1000
square metres, where such project is located within the metropolitan cities of
Bengaluru, Chennai, Delhi National Capital Region (limited to Delhi, Noida,
Greater Noida, Ghaziabad, Gurugram, Faridabad), Hyderabad, Kolkata and Mumbai
(whole of Mumbai Metropolitan Region); or
(ii) 2000 square metres, where such project is
located in any other place;
(e) the project is the only housing project on
the plot of land as specified in clause (d);
(f) the
carpet area of the residential unit comprised in the housing project does not
exceed—
(i) 60
square metres, where such project is located within the metropolitan cities of
Bengaluru., Chennai, Delhi National Capital Region (limited to Delhi, Noida,
Greater Noida, Ghaziabad, Gurugram, Faridabad), Hyderabad, Kolkata and Mumbai
(whole of Mumbai Metropolitan Region); or
(ii) 90 square metres, where such project is
located in any other place;
(g) the stamp duty value of a residential unit
in the housing project does not exceed Rs.45,00,000;
(h) 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;
(i) the project utilises -
(I) 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, where such project is located within the metropolitan cities of
Bengaluru., Chennai, Delhi National Capital Region (limited to Delhi, Noida,
Greater Noida, Ghaziabad, Gurugram, Faridabad), Hyderabad, Kolkata and Mumbai
(whole of Mumbai Metropolitan Region); or
(II) not less than 0% of such floor area ratio
where such project is located in any place other than the place referred to in
sub-clause (i); and
(j) the assessee maintains separate books of
account in respect of the housing project.
Restrictions
: Section 80-IBA is not applicable in respect of an assessee who executes work
contract awarded by any person including Central or State government [Section
80-IBA(3)]
Consequences if the project is not completed within a period of 5 years from the date of approval [Section 80-IBA(4)]
Where the
housing project is not completed within the period specified under section
80-IBA(2)(b) (i.e., 5 years) 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.
Deduction under any other Provisions of the Act Not Allowed if the same is claimed under this section [Section 80-IBA(5)]
While
Section 80-IBA(5) provides a generous deduction for affordable housing
projects, it also restricts the taxpayers from claiming the same deduction
under any other provisions of the Act. This means that if a developer chooses
to claim the deduction under Section 80-IBA(5), they cannot claim any other
deductions that may be available for the same project under other sections of
the Act.
For
example, if a developer qualifies for a deduction under both Section 80-IBA(5)
and Section 80-IB, they will have to choose only one of the deductions. They
cannot claim both deductions for the same project.
This
restriction is aimed at preventing taxpayers from double-dipping and claiming
excessive deductions for the same project. It ensures that the tax benefits
provided under the Act are balanced and fair.
MAT
MAT will be applicable.
Dismisses writ for cut-off date extension under Section 80-IBA; Finds pleadings grossly insufficient
Bombay
High Court dismisses writ petition preferred by
CREDAI-BANM for extending the cut-off date for availing benefits under Section
80-IBA from 31.03.2022 to 31.03.2023 on the grounds of discrimination; High
Court opines that “the present petition is grossly lacking in sufficient
pleadings as would be required from making out a case of discrimination as
claimed by the Petitioner.”; The Petitioner, filed the present writ petition
seeking extension of last date of availing deductions under Section 80-IBA from
31.03.2022 to 31.03.2023 by taking necessary legislative steps and also
extension of time period of completion of construction projects from 5 years to
7 years; The Petitioner submitted that although, both Section 80-IBA and
Section 80-IAC were enacted under Finance Act, 2016, the date of incorporation
for start-up companies was extended from 31.03.2022 to 31.03.2023 by Finance
Act, 2022, however no such extension was granted under Section 80-IBA; The
Petitioner also pointed out that by the Finance Act, 2022 the last date for
availing deductions by manufacturing and production companies under section
115BAB was extended from 31.03.2023 to 31.03.2024; Further, the Petitioner
submitted that the Union of India, being aware of the impact of the pandemic on
the Real Estate Industry, as evident from the advisory issued by Ministry of
Home Affairs, has acted in a discriminatory manner by refusing to extend the
timelines contained in the provisions of section 80-IBA and has thus infringed
upon the fundamental rights of members of the Petitioner under Article 14 of
the Constitution; High Court explains that in order to prove the element of
discrimination, the Petitioner would have to: (i) plead specific facts to
demonstrate that its members as a class and those covered by the provisions of
section 80-IAC are similarly situated, and (ii) make out a case for the
issuance of a writ of Mandamus in exercise of powers vested in this Court under
Article 226 of the Constitution, for directing the Government to legislate and
extend the timelines in the provisions of Section 80-IBA, as requested; Refers
to Supreme Court ruling in V.S. Rice and Oil Mills and others v. State of
A.P. etc. AIR 1964 SC 1781 wherein Supreme Court elucidated in a challenge
to the validity of any statute for violation of Article 14, the grounds should
be specific, clear and unambiguous and it must be shown that the impugned
statute is based on discrimination i.e., any classification which is not rational
and which has no nexus with the object intended to be achieved by the said
statute; Further relies on Supreme Court ruling in State of Orissa And
Others v. Balaram Sahu & Ors (2003) 1 SCC 250 and State of U.P.
& Anr. v. Kamla Palace (2000) 1 SCC 557; Holds that the petition lacks
sufficient pleadings all material particulars required to be stated in the
pleadings, to draw some parity or similarity between members of the Petitioner
and persons stated to be covered by the provisions of section 80-IAC; Also
relies on Supreme Court ruling in Supreme Court Employees’ Welfare v. Union
of India (1989) 4 SCC 187 to hold that High Court could not exercise its
jurisdiction under Article 226 of the Constitution of India, to issue a writ of
Mandamus to the Government, much less to the legislature, directing the
legislation in the nature sought by the Petitioner in the reliefs claimed in the
petition. [In favour of revenue] – [CREDAI-BANM v. Union of India
[TS-995-HC-2022(BOM)] – Date of Judgement : 23.12.2022 (Bom.)]
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