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Tax Opportunity for Builders & Developers- One year extension for approval of Affordable housing scheme
People usually are the happiest at home- William Shakespeare
Tax policies are the designed to promote the social economic objectives of the Government. It also offers an ample opportunity to the taxpayers to save tax by aligning business activities in line with the tax policies of the Government. One such objective of the present Government is “Housing for all by 2022”. To achieve these objectives, Government is offering 100% tax benefit to the builders & developers who are promoting affordable housing scheme. The benefit was available only if the project is approved till 31.03.2019. Recent Union Budget-2019 has granted one more year for approval. Now, the deduction would be available if the project is sanctioned up to 31.03.2020. Tax benefit is provided in section 80IBA of the Income Tax Act-1961. The prominent features of the scheme are as under:
- Tax benefit is available to all class of tax payers, be it individual, HUF, AOP, BOI, company, firm or any other person if income is earned out of the business of developing a housing project (i.e., a project consisting predominantly of residential units with such other facilities and amenities as the competent authority may specify).
- The competent authority has approved the project after 01.06.2016 but before 31.03.2020.
- Taxpayers complete the project within a period of 5 years from the date of first approval by the competent authority. The project is considered as completed if certificate of completion of project as a whole is obtained in writing from the competent authority. If the map is revised later then the date of first approval would be relevant for reckoning the period of 5 years.
- The carpet area of the shops and other commercial establishment included in the housing project does not exceed 3% of the aggregate carpet area.
- There are restrictions on the size of the plot, area of residential unites and minimum utilization of FAR (Floor Area Ratio ) as under:
a] If the Project is located within the cities of Chennai, Delhi, Kolkata or Mumbai (i) plot area should not be less than 1,000 sq. Mtr (ii) Area of residential unit comprised in the housing project should not exceed 30 sq. Mtr (iii) FAR utilization should not be less than 90%
b] If the project is located in any other place other than mentioned in (a) above, (i) plot area should not be less than 2,000 sq. Mtr (ii) Area of residential unit comprised in the housing project should not exceed 60 sq. Mtr (iii) FAR utilization should not be less than 80%.
- The project is the onlyhousing project on such plot of land as mentioned above. More than one project in one plot would debar the claim of deduction u/s 80IBA.
- Where anyone residential unit in the housing project is allotted to an individual then no other residential unit in the housing project shall be allotted to the individual or spouse or the minor children of such individual.
[There is no violation if the second unit is purchased by Parents, Brother or Major Children]
- The assessee should maintain separate books of account in respect of the housing project.
- If project is completed within 5 years but units are sold after 5 years, still the deduction u/s 80IBA would be available. There is condition of 5 years is for completion of project & not for sale of flats. It can be sold at anytime.
If all above conditions are satisfied, 100% of the profit derived from the aforesaid business is deductible u/s 80-IBA. If project is not completed within stipulated time period of 5 years as referred above then the total amount of deduction so claimed and allowed in earlier years, shall be deemed to be business income of the assessee of the previous year in which the period for completion so expires. In my view, ownership of land is not mandatory for claiming deduction u/s 80IBA & even POA holder can also claim above deduction u/s 80 IBA.