Benefit for developers of affordable housing subject satisfaction of certain conditions, under Section 80 IBA
The government has given various benefits to developers in the past, to boost the real estate sector. The income of developers from affordable housing projects is exempt from payment of taxes, subject to the satisfaction of certain conditions, under Section 80 IBA. One of the conditions to be satisfied for this purpose, is that the size of the plot on which the housing project is undertaken should not exceed 1,000 sq metres, if the same is situated in metro cities and its expanded areas, as well as Hyderabad and Bengaluru. For other places, the size of the plot can go up to 2,000 sq metres. Likewise, the carpet area of the house should not exceed 60 sq metres in the metro and mega cities and 90 sq metres in other places. The stamp duty valuation of the house in both the cases should not exceed Rs 45 lakhs. The benefit was to be available, if the approval for the project was obtained by March 31, 2020. Now, the period for obtaining the approval for the project has been extended by one more year, to boost the affordable housing sector. This will certainly help the sector and also in fulfilling the aim of the ‘Housing for All by 2022’ mission.
Presently, if the value at which the developer sells his flat to a buyer is lower than the stamp duty valuation by more than 5%, the difference of stamp duty value over the agreement value is taxed in the hands of the developer, as his business income. The budget proposes to increase the tolerance limit of the difference between stamp duty valuation and agreement value, from 5% to 10%. This proposal will help reduce some of the litigations in genuine cases, where the stamp duty valuation still remains high in spite of a correction in the prices of real estate.
As discussed in the case of developers, about the implications of the difference between the agreement value and stamp duty valuation, even for property transactions between an owner and a buyer, in case the stamp duty valuation of the property is higher than the value adopted in the agreement by more than 5%, the stamp duty valuation is deemed to be the sale consideration. Accordingly, the seller is taxed for the difference in the valuation. The buyer is also deemed to have received gifts to the extent of the difference between these two valuations, which is taxed as income from other sources. In many genuine cases, the stamp duty valuation is generally higher than the real market value, due to the recent corrections in the real estate sector. In order to grant relief in such cases and to avoid litigation, the finance minister has proposed to expand the tolerance limit from 5% to 10%. This is a welcome step and will mitigate hardships in genuine cases.
Presently a person who does not own any residential house and buys a house under the affordable housing category, gets an additional benefit of Rs 1.5 lakhs of interest, under Section 80EEA, in addition to the regular deduction available under Section 24(b). This benefit was introduced last year and was applicable, only if the home loan was sanctioned between April 1, 2019 and March 31, 2020. The FM has proposed to extend this benefit, even if the home loan is sanctioned between April 1, 2020 and March 31, 2021.