|Promoting affordable housing scheme by tax sops to builders & developers|
TAX TALK-27.03.2017-THE HITAVADA
CA. NARESH JAKHOTIA
Promoting affordable housing scheme by tax sops to builders & developers
Recent amendment proposed in the Finance Bill 2017 in section 80IBA would further boost the affordable housing scheme.
There is a scheme which gives full tax benefit to the promoter of affordable housing scheme. Whether the exemption is not available if the more than one flat is sold to other members in the family like wife, son, daughter, father, brother etc? There are some changes in the budget in the last week. What are the changes? If the project is not sold within 2-3 years then how the exemption can be claimed? Whether the exemption would be available if the flat is sold after say 8 years? I have read that more than one building cannot be completed for getting the tax benefit. Is it true? Whether the ownership of plot of the developer is necessary or even in respect of plot taken on power of attorney is sufficient. There are lot of restrictions and conditions on fulfillment of which only the profit is exempt from tax? Please advice the scheme and the precaution to be taken for availing income tax benefit. [firstname.lastname@example.org]
People usually are the happiest at home- William Shakespeare
“Housing for all by 2022”is one of the noble projects of the Government. To make easy availability of affordable house for the common man, Income Tax Act has suitably incorporated provision whereby entire profit of the builder & developer launching affordable housing scheme would be tax free. Deduction is available under section 80-IBAof the Income Tax Act-1961. It is available to all class of tax payers, be it individual, HUF, AOP, BOI, company, firm or any other person, if the following conditions are satisfied:
Amount of deduction:
If the above conditions are satisfied, 100% of the profit derived from the aforesaid business is deductible under section 80-IBA. However, deduction is not available to any assessee who executes the housing project as a works contract awarded by any person (including the central/state government). When deduction is allowed under this section, deduction to the extent of such profit is not available under any other provision of the Act. Deduction has to be claimed in the return of income, otherwise deduction will not be available.
Though the profit is eligible for deduction, still the provision of Minimum Alternate Tax (MAT) or Alternate Minimum Tax (AMT) is applicable. It means that partnership firm and companies may be liable to pay the tax despite income fully deductible from income.
Provision for reversal of deduction is there if project is not completed within stipulated time i.e., where the housing project in not completed within 3 years from the date of first approval by the competent authority 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 earlier years, shall be deemed to be business income of the assessee of the previous year in which the period for completion so expires.
Amendment proposed in the recent Finance Bill-2017:
There are few favorable amendments proposed from the AY 2018-19 which would further promote the scheme of affordable housing. The proposed amendments are as under:
Coming to few more issues mentioned in the queries, it may be noted that
[The author is a practicing Chartered Accountant from Nagpur. Readers may send their direct tax related queries at
SSRPN & Co
10, Laxmi Vyankatesh Apartment
C.A. Road, Telephone Exch. Square
or email it at email@example.com]