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Pradhan Mantri Awas YojanaIn a bid to PM’s mission “ Housing For All by 2022” under Pradhan Mantri Awas Yojana to provide affordable housing to poor and the underprivileged. In Budget 2017-18, The FM has granted affordable housing segment as “ Infrastructure” status. The Government indicates that the affordable housing industry is an important driver of the economy. Experts say that this move will impact positively on real estate industry. “Infrastructure “ status  qualify for the benefits of tax exemptions, even open the doors for easy funding at affordable rates of interest.

When real estate developers facing problems like taxes and fees such as stamp duty, registration fees, service tax, VAT goes very high about 19-30%. More over real estate developers have to pay income tax about 30% for profit earned from construction business, to overcome this problems and make of house affordable give tax benefit to real estate developers the Government has announced 100% deduction of the profits and gains earned from construction business in Budget 2016, by inserting new section 80-IBA of Income Tax act, 1961.

Scheme Details:

Section 80-IBA – 100% deduction of Profit and Gain (Affordable Housing Scheme for All)

In Finance Act, 2016, section 80-IBA – Affordable Housing Scheme for All was inserted with effect from 01-Apr-2017. 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.

For the purposes of above benefit, a housing project shall be a project which fulfills the following conditions, namely:

  1. The project is approved by the competent authority after the 1st day of June, 2016, but on or before the 31st day of March, 2019, in accordance with such guidelines as may be prescribed;
  2. The project is completed within a period of three years [ In Budget 2017-18 inserted – of Five Years, (w.e.f 01-Apr-2018)]  from the date of approval by the competent authority. If approval for more than 1 time than 3 years from first approval.
  3. The housing project should not exceed 3% of aggregate built-up area [ Carpet Area ].
  4. Not more than 1 residential unit shall be allotted to the individual or the spouse or the minor children of such individual.
  5. Separate books of accounts to be maintained for the said projects.
  6. Benefit u/s 80-IBA will not be allowed to a works contractor, who will execute the housing project awarded by any person.
  7. Where the housing project is not completed within the period of 3 years [ In Budget 2017-18 inserted – of Five Years, (w.e.f 01-Apr-2018)]  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.

Some specific conditions considering project size and residential unit as below:

PARTICULARS NON METRO CITIES METRO CITIES *
Project Site Within the jurisdiction of any municipality or cantonment board Within the area of 25 kilometers from the municipal limits [In Budget 2017-18 : Omitted ]
Resident Unit Size Does not Exceed 60 Square Mtrs (Carpet Area) Does not Exceed 30 Square Mtrs (Carpet Area)
Total Area of Project Not less than 2000 Sq Mtr Not less than 1000 Sq Mtr
Project utilisation % of floor area Not less than 80% Not less than 90%

*(Chennai,Delhi, Kolkata,Mumbai)

For the purposes of this section:

  1. built-up area[ Carpet 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; [ In Budget 2017-18 substituted  – Built up area word by “ Carpet area”, (w.e.f 01-Apr-2018)] [“ 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].
  2. “competent authority” means the authority empowered by the Central Government.
  3. “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;
  4. “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;
  5. “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 household.

(The author is a member of Tax Practitioner Club-Mumbai)

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