NewZNew (Chandigarh) : In a big relief to builders and developers, the Government shall now allow a deduction from their gross income of an amount equal to hundred percent of the profits and gains derived from their business of developing and building affordable housing projects of residential units from 30 to 60 sq mtrs.

This is applicable on projects approved and completed within three years from June 1, 2016 to March 31, 2019 within and beyond 25-kms of municipal or cantonment board limits, says a new notification issued by the Central Government by inserting a new Section 80 IBA in the Income Tax Act.

A project would be considered completed when it gets a certificate of completion in writing from the competent authority, the notification said.

Lauding the Central Government, President of National Real Estate Development Council (NAREDCO), an apex body of builders and developers, Mr Parveen Jain said it would certainly boost the housing construction activity and in giving timely delivery of flats to home buyers.

”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,” Mr Jain said.

This will be applicable to housing projects of not less than 2000 sq mtr in any plot size and 60 sq.mts. residential unit size in any municipal or cantonment board limit and not less than 1000 sq mtr plot size and 30 sq.mts. residential unit size in metro cities (Delhi, Mumbai, Kolkata and Chennai), he said.

Built up area of shop or other commercial establishment would not exceed three percent of aggregate built-up area, the notification said, adding that permissible floor area ratio is not less than 80% in non-metro areas and not less than 90% in metro cities

“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,” the notification said, adding that builder assessee has to maintain separate books of accounts in respect of housing project.

Where the housing project is not completed within three year from date of approval, in respect of which a deduction has been claimed and allowed under section 80-IBA, 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.

For Example, Project was approved on July 01, 2016 than the project should be completed on or before June 30, 2019. If not completed before June 30, 2019 than deduction claimed u/s 80-IBA was taxed in FY 2019-20.

The notification also made changes in the service tax in respect of (i) housing projects under Housing For All (HFA) (Urban) Mission/Pradhan Mantri Awas Yojana (PMAY);

(ii) low cost houses up to a carpet area of 60 sq mtrs in a housing project under “Affordable housing in Partnership” component of PMAY,

(iii) low cost houses up to a carpet area of 60 sq mtrs in a housing project under any housing scheme of the State Government, are being exempted from Service Tax with effect from March 01, 2016.