Query 1]
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. [rao2319k@gmail.com]
Opinion:

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:

Income is earned from 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 31.03.2019.
Assessee completes the project within a period of 3 years from the date of first approval by the competent authority. 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.
The built-up area of the shops and other commercial establishment included in the housing project does not exceed 3% of the aggregate built-up 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 (or within the distance, measured aerially, of 25 kilometers from the municipal limits of these cities), (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 only housing project on such plot of land as mentioned above.
Where any one 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 spouse or the minor children of such individual.
The assessee should maintain separate books of account in respect of the housing project.

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.

MAT/AMT applicable:
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.

Caution:
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:

Presently, there is a restriction of 30 & 60 sq. meter of built up area as mentioned above for individual units. After the amendment, instead of built up area, carpet area 30 & 60 sq meter will be reckoned. As a result, little higher size of unit would be possible.
The 30 sq. meter limit will apply only in case of municipal limits of four metropolitan cities while for the rest of the country, including in the peripheral areas of metros, limit of 60 sq. meter will apply.
In order to be eligible, the period of completion of the scheme is proposed to be extended to 5 years from existing 3 years criteria.

Coming to few more issues mentioned in the queries, it may be noted that

If project is completed within 3 years (5 years w.e.f 01.04.2017) but Flats are sold after 3 years, still the deduction u/s 80IBA would be available. There is condition of 3 years (5 years after amendment) for completion of project & not on sale of flats. It can be sold at anytime.
There should be one project on single plot of land and that should also be housing project, as per of section 80IBA(2)(d). More than one project in one plot would debar the claim of deduction u/s 80IBA.
More than one unit cannot be sold to individual himself/herself or the spouse or the minor children of such individual. There is no such restriction in respect of sale to major son/daughter, brother, sister etc.
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.

[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
Nagpur-440008
or email it at nareshjakhotia@ssrpn.com]

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