Amended and updated notes on section 80-IBA of Income Tax Act 1961 as amended by the Finance Act 2020 and Income-tax Rules, 1962. Detail discussion on provisions and rules related to deductions in respect of profits and gains from housing projects.
Chapter VIA (Sections 80A to 80U) of the Income Tax Act 1961 deals with the provisions related to deductions to be made in computing total income. Section 80-IBA of IT Act 1961-2022 provides for deductions in respect of profits and gains from housing projects.
Recently, we have discussed in detail section 80-IB (Deduction in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings) of IT Act 1961. Today, we learn the provisions of section 80-IBA of Income-tax Act 1961. The amended provision of section 80-IBA is effective for financial year 2022-23 relevant to the assessment year 2023-24.
In this article, you will learn detail of the provisions of section 80-IBA of the Income Tax Act, 1961 Bare Act read with the Income-tax Rules, 1962, regulations, notifications, circulars, orders and Press Release by CBDT, Income Tax Department and the Ministry of Law and Justice, Government of India.
Section 80-IBA: Deductions in respect of profits and gains from housing projects
Section 80-IBA(1) of Income Tax Act
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.
Section 80-IBA(1A) of Income Tax Act
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.
[Sub-section (1A) of section 80-IBA inserted w.e.f. 01.04.2022 by the Finance Act 2021]
Section 80-IBA(2) of Income Tax Act
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, 2022;
(b) the project is completed within a period of five years from the date of approval by the competent authority:
[Clause (b) of sub-section (2) of section 80-IBA has been amended (Substituted) w.e.f. 01.04.2022 by the Finance Act 2021]
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 carpet area of the shops and other commercial establishments included in the housing project does not exceed three per cent of the aggregate 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; 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 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; 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, 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:
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.
Section 80-IBA(3) of Income Tax Act
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).
Section 80-IBA(4) of Income Tax Act
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.
Section 80-IBA(5) of Income Tax Act
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.
Section 80-IBA(6) of Income Tax Act
For the purposes of this section,—
(a) “carpet area” shall have the same meaning as assigned to it in clause (k) of section 2 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;
(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;
[Clause (da) of sub-section (6) of section 80-IBA inserted w.e.f. w.e.f. 01.04.2022 by the Finance Act 2021]
(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;
(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.