Affordable housing projects: section 80-IBA, the minimum tax, and the 2025 Act

A developer builds an affordable housing project, satisfies every condition in section 80-IBA, and claims a deduction of a hundred per cent of its profit. Its total income is nil. It then pays tax at fifteen per cent of the same profit, because section 115JB computes minimum alternate tax on book profit, and the list of things that reduce book profit does not include a Chapter VI-A deduction. If the developer is a limited liability partnership instead, it pays eighteen and one-half per cent, because section 115JC adds the deduction back by name. If the developer is a company that once opted into the twenty-two per cent rate in section 115BAA, it gets no deduction at all.

None of that is a loophole or an oversight. It is the design, and it has been the design since the incentive was enacted. What has changed, and changed very recently, is the part that made it tolerable. Under the Income-tax Act, 1961 the minimum tax was a prepayment: section 115JAA gave the company a credit to be set off in the fifteen years that followed. Under the Income-tax Act, 2025, the clauses that carried that credit forward were omitted with effect from 1 April 2026, which is the day the Act came into force. On the face of the text, a developer company that pays minimum tax on a tax year 2026-27 affordable housing profit does not get it back.

This article is about the whole of that picture, in the order a practitioner meets it: what section 80-IBA requires, condition by condition; where the conditions have been litigated, where the litigation is split, and where no court has said anything at all; what the minimum tax and the alternate minimum tax do to the deduction and how the choice of vehicle changes the answer; the stamp duty value, unsold stock and joint development provisions that sit alongside the deduction and can undo it; and what the 2025 Act froze, changed and, on one reading, broke.

Key points

• Section 80-IBA is closed to new projects, the approval window having ended on 31 March 2022, but live for years to come: a project approved on that date has until 31 March 2027 to complete, and the completion condition can be tested long afterwards.
• Nine conditions in section 80-IBA(2) govern a project approved up to 31 August 2019. For a project approved on or after 1 September 2019 the proviso substitutes a different set, with larger carpet areas, a wider list of metropolitan cities, and a new cap of forty-five lakh rupees on the stamp duty value of a unit. The Rs 45 lakh cap is not a general condition of section 80-IBA and does not touch an earlier project at all.
• The deduction does not reduce book profit. A company claiming it pays minimum alternate tax at fifteen per cent, fourteen per cent for a tax year beginning on or after 1 April 2026. A firm or limited liability partnership pays alternate minimum tax at eighteen and one-half per cent, with no threshold, because section 115JEE(2) does not mention a firm.
• No decision of any High Court or the Supreme Court on section 80-IB(10) or section 80-IBA against section 115JB could be found for this article. The nearest authority, Sankhla Polymers on section 80-IB generally, is against the assessee and its special leave petition was dismissed.
• Whether a breach by some units costs the whole deduction or only those units is split between High Courts and formally open. The pro rata line rests on the words of section 80-IB(10)(c), which qualifies a residential unit. Section 80-IBA(2) is drafted at project level, which is the strongest argument the Revenue has not yet had to make.
• The completion certificate question in Bombay is under reference to a Larger Bench, by an order of 31 July 2026. Nothing in that line should be described as settled.
• The 2025 Act does not re-enact the deduction. Section 142 imports section 80-IBA of the 1961 Act by reference, so the 1961 conditions and the 1961 case law remain the operative law for a claim made under the new Act.
• Two things commonly mis-stated: section 80-IBA contains no definition of an “affordable housing project” and the word “affordable” does not appear in it at all, affordability being built into the conditions rather than into a label; and the Rs 45 lakh stamp duty value cap is not a general condition of the section.
• The omission of clauses (m) to (p) of section 206(1) of the 2025 Act, read with the gateway in section 206(3)(a), leaves a non-optant domestic company with no express machinery for its brought-forward minimum alternate tax credit and no forward-looking credit at all. That reading is set out below and argued both ways; it is the point on this subject most worth watching.

Three regimes and an eight year gap: section 80-IB(10), section 80-IBA and section 142 of the 2025 Act

A reader looking for the law on the taxation of an affordable housing project is looking at three statutory regimes that do not join up.

The first is section 80-IB(10), which allows a hundred per cent deduction to “an undertaking developing and building housing projects approved before the 31st day of March, 2008 by a local authority”. Approval had to come before 31 March 2008 and development had to have commenced on or after 1 October 1998. Everything about the provision, including the great mass of litigation it generated, concerns projects approved in that window.

The second is section 80-IBA, inserted by section 44 of the Finance Act, 2016 with effect from 1 April 2017, which allows a hundred per cent deduction on profits from “the business of developing and building housing projects” where the project was approved “after the 1st day of June, 2016, but on or before the 31st day of March, 2022”.

Between those two windows there is nothing. A housing project approved on 1 April 2008, or in 2010, or in 2015, had no project-level deduction available to it. That gap of a little over eight years is worth stating plainly, because a good deal of commentary treats section 80-IBA as a continuation of section 80-IB(10) and it is not. It is a fresh provision, with different measures (carpet area instead of built-up area), different geography, a different clawback, and conditions that have no counterpart in the older section.

The third regime is the Income-tax Act, 2025, in force from 1 April 2026 under section 1(3). It does not re-enact either deduction. Section 142 is headed “Deductions in respect of profits and gains from housing projects” and reads, in full:

“142. In respect of any tax year, where— (a) the gross total income of an assessee, includes any profits and gains derived from the business of developing and building housing projects or rental housing projects referred to in section 80-IBA of the Income-tax Act, 1961 (43 of 1961); and (b) such assessee is eligible to claim a deduction from the profits and gains derived from such business for such tax year under the provisions of the said section, as if the said Act had not been repealed, there shall be allowed, in computing the total income of the assessee, a deduction from the profits and gains derived from such business, subject to the conditions that— (i) the amount of deduction is calculated as per the provisions of section 80-IBA of the Income-tax Act, 1961 (43 of 1961); and (ii) the deduction under this Act shall be allowed only for such tax years, as would have been allowed under section 80-IBA of the Income-tax Act, 1961 (43 of 1961), as if the said Act had not been repealed.”

Section 141 does the same for section 80-IB, referring to that section as a whole and not separately to sub-section (10).

Three consequences follow, and they shape the rest of this article. First, the conditions in section 80-IBA(2) are still the operative conditions for a claim made for tax year 2026-27, because section 142 does not reproduce them but tests eligibility against the repealed provision counterfactually. Second, the whole body of case law on section 80-IBA, and the section 80-IB(10) case law that informs it, remains directly in point under the new Act; nothing has been reset. Third, a project that had already fallen outside section 80-IBA, because it was never approved inside the window, gets nothing from section 142: the section is a conduit, not a new grant.

What section 80-IBA actually requires, condition by condition

Sub-section (1) is the grant. Sub-section (2) is the gate, and it opens with the words “For the purposes of sub-section (1), a housing project shall be a project which fulfils the following conditions, namely:—”. There are nine conditions, lettered (a) to (i), and for projects approved on or after 1 September 2019 the proviso replaces six of them with seven.

The conditions as originally enacted, and as they stand for a project approved between 2 June 2016 and 31 August 2019, are these.

(a) The approval window. “the project is approved by the competent authority after the 1st day of June, 2016, but on or before the 31st day of March, 2022”. Note the word “after”: a project approved on 1 June 2016 itself is outside. The date 31 March 2022 is the fourth version of this clause. As enacted it read 31 March 2019; section 7 of the Finance Act, 2019 (No. 1) made it 2020, section 38 of the Finance Act, 2020 made it 2021, and section 29(b) of the Finance Act, 2021 made it 2022. No later amendment of section 80-IBA could be found on the Department’s own site, and the edition of the section that the Department labels 2026 still carries 31 March 2022.

(b) Completion within five years, with two deeming rules in the proviso: where approval is obtained more than once the project is deemed approved on the date the building plan was first approved, and the project is deemed completed when a certificate of completion of the project as a whole is obtained in writing from the competent authority. As enacted the period was three years; section 37(a)(i) of the Finance Act, 2017 substituted five with effect from 1 April 2018.

(c) Commercial area. “the carpet area of the shops and other commercial establishments included in the housing project does not exceed three per cent of the aggregate carpet area”. This clause is not replaced by the 1 September 2019 proviso, which substitutes only clauses (d) onwards, so three per cent is the figure for every section 80-IBA project.

(d) Plot size. Not less than one thousand square metres in Chennai, Delhi, Kolkata or Mumbai, and two thousand square metres anywhere else.

(e) One project to a plot. “the project is the only housing project on the plot of land as specified in clause (d)”. There is no counterpart to this in section 80-IB(10), and the difference matters enormously; it is taken up below.

(f) Unit carpet area. Not exceeding thirty square metres in Chennai, Delhi, Kolkata or Mumbai, and sixty square metres anywhere else.

(g) One unit per family. “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”.

(h) Floor area ratio. The project must utilise not less than ninety per cent of the permissible floor area ratio in the four named cities, and not less than eighty per cent elsewhere.

(i) Separate books of account in respect of the housing project.

For a project approved on or after 1 September 2019, the proviso inserted by section 26(A) of the Finance (No. 2) Act, 2019 directs that sub-section (2) “shall have effect as if for clauses (d) to (i), the following clauses had been substituted”. The substituted set changes four things and adds one.

The geography widens. In place of “the cities of Chennai, Delhi, Kolkata or Mumbai” the substituted clauses use “the metropolitan cities of Bengaluru, Chennai, Delhi National Capital Region (limited to Delhi, Noida, Greater Noida, Ghaziabad, Gurugram, Faridabad), Hyderabad, Kolkata and Mumbai (whole of Mumbai Metropolitan Region)”. Four cities become eight metropolitan areas, defined by name rather than by municipal limit.

The unit carpet area doubles and rises by half, from thirty to sixty square metres in the metropolitan cities and from sixty to ninety square metres elsewhere. This is the change that made the provision usable, because a thirty square metre unit in Mumbai is a very small flat indeed.

A new condition appears: clause (g) of the substituted set, “the stamp duty value of a residential unit in the housing project does not exceed forty-five lakh rupees”. Nothing like it exists for an earlier project.

The family condition and the separate books condition move down a letter, from (g) and (i) to (h) and (j), because of the new clause. That renumbering is a trap in citation. A submission that cites “section 80-IBA(2)(g)” for the family condition is right for a project approved up to 31 August 2019 and wrong for one approved afterwards, where clause (g) is the stamp duty value condition and the family condition is clause (h).

The two sets side by side, for citation:

Condition	Approved 2.6.2016 to 31.8.2019	Approved on or after 1.9.2019
Approval window	(a)	(a), unchanged
Completion in five years	(b)	(b), unchanged
Commercial carpet area, 3 per cent	(c)	(c), unchanged
Plot size, 1,000 or 2,000 sq m	(d), four cities	(d), eight metropolitan areas
Only housing project on the plot	(e)	(e), unchanged in words
Unit carpet area	(f), 30 or 60 sq m	(f), 60 or 90 sq m
Stamp duty value not above Rs 45 lakh	none	(g), new
One unit per family	(g)	(h)
Floor area ratio, 90 or 80 per cent	(h)	(i), in sub-clauses (I) and (II)
Separate books of account	(i)	(j)

Clauses (a), (b) and (c) are outside the substitution and are the same for every section 80-IBA project. The plot size figures are the same in both sets; only the geography moves.

There is a drafting oddity in the proviso which is worth recording because it looks like a transcription error and is not. The words of substitution say “as if for clauses (d) to (i)”, which is six clauses, while the substituted set runs (d) to (j), which is seven. The same mismatch appears on the Department’s section page and in section 26(A) of the Finance (No. 2) Act, 2019 itself, so it is in the statute. It has no practical consequence that is apparent, since the substituted set is set out in full, but anyone comparing the two sets should expect it.

Three further features of the section are easy to miss, and the first of them favours the assessee while the other two cut the other way.

Section 80-IBA has no sub-section (7) and no Explanation. Its sub-sections run (1), (1A), (2), (3), (4), (5) and (6), and that is all. Section 80-IB, by contrast, has sub-section (13), which provides that “the provisions contained in sub-section (5) and sub-sections (7) to (12) of section 80-IA shall, so far as may be, apply to the eligible business under this section”. So a section 80-IB(10) claim carries with it the audit report requirement in section 80-IA(7), the inter-unit transfer provision in section 80-IA(8), the ceiling in section 80-IA(9), and the excessive profits provision in section 80-IA(10). Section 80-IBA imports none of them.

The first of the imported provisions is the one most often litigated and it is worth saying what it is. Section 80-IA(5) directs that for the purpose of determining the quantum of the deduction, the profits of the eligible business be computed “as if such eligible business were the only source of income of the assessee” from the initial assessment year onwards. Under section 80-IB(10), carried in by sub-section (13), that fiction requires notional losses and depreciation of the eligible business from earlier years to be set against its profits before the deduction is computed, even where they have in fact been absorbed against other income. Section 80-IBA contains no such provision, so on the words the deduction is computed on the actual profits of the eligible business for the year, without any notional carry back of its own earlier losses. For a project that loses money in its construction years and makes it in its sale years, which is every project, that difference is worth a great deal, and it is the clearest instance of the drafting asymmetry this article keeps returning to. The two remaining imported sub-sections, section 80-IA(11) and (12), which concern notified undertakings and amalgamations and demergers, are also absent from section 80-IBA.

That absence has real consequences. There is no separate audit report prescribed for a section 80-IBA claim, the only accounts condition being the separate books of account in clause (2)(i) or (j). There is no provision allowing the Assessing Officer to recompute the profits of the eligible business as the amount that “may be reasonably deemed to have been derived therefrom” where a close connection has produced “more than the ordinary profits”, which is what section 80-IA(10) permits against a section 80-IB claim. Whether the Revenue can reach the same result through the words “derived from such business” in section 80-IBA(1), or through the specified domestic transaction machinery, is a question this article does not attempt to answer, because the current scope of section 92BA was not closed against a primary source for this piece. What can be said is that the ordinary route is not available, and that a Departmental submission invoking section 80-IA(10) against a section 80-IBA claim has no importing provision to stand on.

The section defines the unit as well as the project, and the definition is doing more work than it appears to. Clause (6)(e) provides that a “residential unit” means “an independent housing unit with separate facilities for living, cooking and sanitary requirements, distinctly separated from other residential units within the building, which is directly accessible from an outer door or through an interior door in a shared hallway and not by walking through the living space of another household”. Every one of the conditions that bites on a unit, the carpet area condition in clause (2)(f), the stamp duty value condition in clause (g) of the substituted set and the family allotment condition, is expressed as a condition about “a residential unit”, so this definition is the measuring rod for all three. Section 80-IB(10) had no equivalent: the expression “residential unit” is used throughout the older provision and nowhere defined in section 80-IB(14).

Sub-section (5) is the no double deduction rule: where profits are claimed and allowed under section 80-IBA, “deduction to the extent of such profit and gains shall not be allowed under any other provisions of this Act”. Note that it is narrower than section 80-IA(9), which also imposes a ceiling at the profits of the eligible business; section 80-IBA has no such ceiling of its own.

Sub-section (3) is the works contract bar: “Nothing contained in this section shall apply to any assessee who executes the housing project as a works-contract awarded by any person (including the Central Government or the State Government).” Under section 80-IB(10) the equivalent arrived as a closing Explanation inserted by section 37(c)(iv) of the Finance (No. 2) Act, 2009 and deemed inserted with retrospective effect from 1 April 2001, which produced a decade of reassessment litigation. Under section 80-IBA the bar was there from the first day, so none of that retrospectivity argument is available either way.

The two sunset dates, and the rental housing limb that has no notification

Two dates close section 80-IBA and they close it at different times.

The approval sunset is 31 March 2022, in clause (2)(a). After that date no project can qualify, whatever its dimensions.

The completion deadline is five years from approval, in clause (2)(b), read with the first limb of the proviso which relates repeated approvals back to the first approval of the building plan. For a project approved on 31 March 2022, five years expires on 31 March 2027. The deduction is claimed year by year as profits arise, and the clawback in sub-section (4) operates in the previous year in which the period for completion expires. So the provision will be producing assessments, appeals and clawbacks well into the 2030s, and every one of them will be decided by reference to a repealed Act through section 142 of the 2025 Act.

The relation-back rule in the proviso deserves a sentence of its own, because it can be fatal in a way that is not obvious. A project whose building plan was first approved in, say, February 2016, and which was re-approved with revisions in 2017, is “deemed to have been approved on the date on which the building plan of such housing project was first approved”. That deemed date is before 1 June 2016, so clause (2)(a) is not satisfied and the project is outside the section altogether, notwithstanding that the approval the developer actually built on is a 2017 approval. The same rule exists in the Explanation to section 80-IB(10)(a), where the Bombay High Court held in CIT v. Vandana Properties that “the said Explanation would not apply where the approval is granted to different housing projects”. That is the answer where the later approval is genuinely a different project, and it is a question of fact.

Then there is section 80-IBA(1A), the rental housing limb, inserted by section 29(a) of the Finance Act, 2021 with effect from 1 April 2022:

“(1A) Where the gross total income of an assessee includes any profits and gains derived from the business of developing and building rental housing project, there shall be allowed a deduction of an amount equal to hundred per cent of the profits and gains derived from such business.”

Two things about it are odd on the face of the text. First, sub-section (1A) does not contain the words “subject to the provisions of this section” which sub-section (1) carries, and sub-section (2) opens “For the purposes of sub-section (1)”. On a literal reading, therefore, none of the nine conditions applies to the rental limb, and the clawback in sub-section (4), which is keyed to “the period specified under clause (b) of sub-section (2)”, has nothing to operate on. Second, the whole limb depends on a definition that depends on a notification. Clause (6)(da) defines a rental housing project as “a project which is notified by the Central Government in the Official Gazette under this clause on or before the 31st day of March, 2022 and fulfils such conditions as may be specified in the said notification”.

No notification under section 80-IBA(6)(da) could be located for this article. Searches of the Department’s notification collection, of its advanced search for the phrase “rental housing project” and for “clause (da) of sub-section (6)”, and general and Gazette-directed web searches, returned none. That is a statement about what the searches returned and not an assertion that none exists; but the timing makes the nil finding plausible, because section 29 of the Finance Act, 2021 brought the limb into force “with effect from the 1st day of April, 2022” while the definition required the enabling notification to issue on or before 31 March 2022, that is, before the limb itself commenced. A limb that comes into existence the day after the last date for issuing the instrument that gives it content is difficult to operate. Anyone with a client who proposes to claim under sub-section (1A) should ask the Department, in writing, for the notification relied on.

Section 142 of the 2025 Act expressly carries the rental limb across, referring to “housing projects or rental housing projects referred to in section 80-IBA”, so whatever the position is, it is preserved rather than resolved.

“Housing project”, the commercial component, and a percentage that reversed

Section 80-IBA(6)(d) defines a housing project as “a project consisting predominantly of residential units with such other facilities and amenities as the competent authority may approve subject to the provisions of this section”. Section 80-IB(10) used the expression “housing project” without defining it anywhere; the definitions in section 80-IB(14) run (a), (aa), (ab), (b), (c), (d), (da), (e), (f) and (g), and none of them is a definition of “housing project”. That absence is what produced the first great controversy under the older section.

The question was whether a project approved by the local authority as a composite residential and commercial development was a “housing project” at all, and if so to what extent. The Bombay High Court answered it in CIT-II, Pune v. Brahma Associates, Income Tax Appeal No. 1194 of 2010, decided by Devadhar and Mrs Mridula Bhatkar JJ on 22 February 2011, in five lettered answers at paragraph 30. The first two were that up to 31 March 2005, and subject to the other conditions, the deduction was allowable “to housing projects approved by the local authority having residential units with commercial user to the extent permitted under the DC Rules / Regulations framed by the respective local authority”, and that in such a case the deduction “would be allowable irrespective of the fact that the project is approved as ‘housing project’ or ‘residential plus commercial’”. The third answer rejected the Tribunal’s rule of thumb that ten per cent of built-up area was the limit: “In the absence of any provisions under the Income Tax Act, the Tribunal was not justified in holding that upto 31/3/2005 deduction under Section 80IB(10) would be allowable to the projects approved by the local authority having residential building with commercial user upto 10% of the total built-up area of the plot.” The fifth was that clause (d), inserted with effect from 1 April 2005, “is prospective and not retrospective and hence cannot be applied for the period prior to 1/4/2005”.

The Supreme Court dealt with the appeals in CIT, Central Pune v. Veena Developers, a daily order of Sikri and Nariman JJ in SLP(C) No. 22450 of 2011 and a connected batch, dated 28 April 2015. The Court said “We are in agreement with the aforesaid answers given by the High Court to the various issues”, and then narrowed one of them: “we clarify that direction (b) is to be read in that context where the project is predominantly housing/ residential project but the commercial activity in the residential units is permitted”. With that clarification it disposed of all the petitions. The date is worth getting right: one widely used commentary source gives 30 April 2015, which is the adjourned date for a few connected matters recorded inside the order, not the date of the order itself.

For a project approved on or after 1 April 2005, clause (d) of section 80-IB(10) applies on its own terms, and here there is a trap that has defeated a good deal of secondary writing. Clause (d) had two different forms and the direction of its test reversed.

As inserted by section 18(d) of the Finance (No. 2) Act, 2004 with effect from 1 April 2005, it required that the built-up area of shops and other commercial establishments “does not exceed five per cent of the aggregate built-up area of the housing project or two thousand square feet, whichever is less”. Section 27(ii) of the Finance Act, 2010 then substituted “three per cent” for “five per cent” and “five thousand square feet, whichever is higher” for “two thousand square feet, whichever is less”. Section 27 of that Act carries no express commencement words; the date comes from section 1(2), under which sections 2 to 56 are deemed to have come into force on 1 April 2010.

So the position is: for assessment years up to and including 2009-10 the cap is the lesser of five per cent and two thousand square feet; from assessment year 2010-11 it is the greater of three per cent and five thousand square feet. Both the percentage and the direction of the comparison changed. A great deal of commentary attributes this change to the Finance (No. 2) Act, 2009, which is the Act that inserted clauses (e) and (f) and the works contract Explanation but did not touch clause (d). The same misattribution affects the five year completion period in clause (a)(iii), which is also the Finance Act, 2010.

Under section 80-IBA the equivalent condition is clause (2)(c), three per cent of the aggregate carpet area, with no square footage alternative in either direction and no change over time. Two questions arise on it and neither has been decided.

The first is whether the Brahma Associates line survives at all. The argument that it does is that section 80-IBA(6)(d) uses the same idea the Supreme Court used in Veena Developers, the word “predominantly”, and that a project which is predominantly residential does not cease to be a housing project because some commercial space is approved within it. The argument that it does not is that Brahma Associates and the clarification in Veena Developers were answers given for a period in which the statute contained no express cap on commercial area, which is why the Court said that in the absence of any provision the Tribunal could not fix a percentage; where the statute does fix a percentage, as clause (2)(c) does, the percentage is the answer and there is nothing left for a judicial test of predominance to do. That argument looks to be the stronger one, and the practical consequence is that clause (2)(c) is a hard three per cent.

The second is what happens if the commercial carpet area exceeds three per cent. On the Madras, Karnataka and Bombay pro rata reasoning the answer might be that the excess commercial area simply does not attract the deduction. On the project-level reading of Brahma Associates answer (d) it is the whole project that fails. That takes us to the central dispute, below.

Carpet area, built-up area, and four definitions that do not match

Section 80-IBA measures a residential unit by carpet area. Section 80-IB(10) measured it by built-up area. The Goods and Services Tax notification measures it by carpet area but tests affordability on a different base again, and the housing ministry’s own scheme uses its own figures. Four measures, four purposes, and no two of them identical.

Section 80-IB(14)(a) defines built-up area as “the inner measurements of the residential unit at the floor level, including the projections and balconies, as increased by the thickness of the walls but does not include the common areas shared with other residential units”. So wall thickness is added, balconies and projections are in, shared common areas are out.

Section 80-IBA(6)(a) does not define carpet area. It adopts “the same meaning as assigned to it in clause (k) of section 2 of the Real Estate (Regulation and Development) Act, 2016”. That definition, from the Act as published by the Government of India, is:

“(k) ‘carpet area’ means the net usable floor area of an apartment, excluding the area covered by the external walls, areas under services shafts, exclusive balcony or verandah area and exclusive open terrace area, but includes the area covered by the internal partition walls of the apartment.”

So external walls are out, service shafts are out, the exclusive balcony or verandah is out, the exclusive open terrace is out, and internal partition walls are in. For the same flat this is a materially smaller number than built-up area under section 80-IB(14)(a). The two are not interchangeable and a conversion ratio taken from a sales brochure is not a substitute for measurement.

The limit that definition fed into was in section 80-IB(10)(c): the residential unit had to have a maximum built-up area of one thousand square feet where it was situated within the city of Delhi or Mumbai or within twenty-five kilometres from the municipal limits of those cities, and one thousand five hundred square feet at any other place. Those are the figures every pro rata decision discussed below is about.

Measure the unit that clause (6)(e) describes, not the unit on the floor plan. Where two numbered flats have been sold to one buyer and combined, the carpet area to be tested is the carpet area of what the definition treats as one residential unit, which is the point taken up under the family allotment condition below.

The adoption of the RERA definition arrived by amendment. As enacted, section 80-IBA(2)(c) and (f) used “built-up area”, and section 80-IBA(6)(a) defined it; section 37(a)(ii) and section 37(b) of the Finance Act, 2017, with effect from 1 April 2018, substituted “carpet area” for “built-up area” wherever those words occurred in clauses (c) and (f) and substituted the RERA-linked definition. The same section also omitted the words “or within the distance, measured aerially, of twenty-five kilometres from the municipal limits of these cities” wherever they occurred. The twenty-five kilometre test itself, incidentally, was never removed from section 80-IB(10)(c), which to this day measures a unit “situated within the city of Delhi or Mumbai or within twenty-five kilometres from the municipal limits of these cities”.

The litigation on area measurement is all under the older section and all of it is about two narrow questions.

The first is whether the definition of built-up area inserted by the Finance (No. 2) Act, 2004 could be applied to a project approved before 1 April 2005. The Karnataka High Court held it could not, in CIT v. G.R. Developers, decided on 29 February 2012. The Indian Kanoon text of the operative paragraph of that judgment is a corrupt scan and nothing in it is quotable; the holding is available in clean form because the Bombay High Court reproduced it at paragraph 39 of CIT-16, Mumbai v. Happy Home Enterprises, decided on 19 September 2014, where it appears as “cannot be held to be retrospective” and “It applies only to such housing projects, which are approved subsequent to” the date. The Allahabad High Court followed the same line in CIT-1, Lucknow v. Arif Industries Ltd, 7 April 2017, adopting the Karnataka reasoning at paragraph 45 and answering the built-up area questions in the assessee’s favour at paragraph 49.

The second is whether an open terrace is built-up area. The Rajasthan High Court held it is not, in Pr. CIT, Jaipur-2 v. Ashiana Manglam Developers, 14 November 2017, and the reasoning is purely textual: at paragraph 10 the Court observed that “even after amendment the legislature has included the balcony and projection but not the” terrace, and at paragraph 11 that “terrace is different then balcony which is provided in addition to the facilities”. The ratio is narrow. It covers an uncovered terrace, open to sky, with no construction on it. It does not cover a covered terrace, and it plainly does not cover a balcony or a projection, which the statute names.

No decision of any High Court or of the Supreme Court on the carpet area limits in section 80-IBA could be located for this article, and the only decision at any level is a Tribunal order. That order is of the Ahmedabad Bench, in ITO v. Kavish Infrastructure, ITA No. 1761/Ahd/2024, dated 26 May 2025, which concerned the sixty square metre limit and went against the Revenue for want of a reference to the Departmental Valuation Officer. That is a procedural outcome rather than an answer on measurement, and it points at a practical route: where measurement is in issue, the valuation reference under section 142A is the machinery, and an addition made without it is vulnerable.

The table below sets the four measures side by side. It is the single most useful page of this article to keep on a file, because the mismatch between them is where clients get caught: a unit can be affordable for the goods and services tax and not for income tax, or qualify under the housing ministry’s scheme and fail both.

Measure	Source	What it is	Unit limit	Price or value test
Built-up area	Income-tax Act 1961, s.80-IB(14)(a)	Inner measurements at floor level, plus wall thickness, including projections and balconies, excluding shared common areas	1,000 sq ft in Delhi or Mumbai or within 25 km of their municipal limits; 1,500 sq ft elsewhere (s.80-IB(10)(c))	None
Carpet area (income tax)	Income-tax Act 1961, s.80-IBA(6)(a), adopting RERA s.2(k)	Net usable floor area, excluding external walls, service shafts, exclusive balcony or verandah, exclusive open terrace; including internal partition walls	Approved up to 31.8.2019: 30 sq m in Chennai, Delhi, Kolkata, Mumbai; 60 sq m elsewhere. Approved on or after 1.9.2019: 60 sq m in eight metropolitan areas; 90 sq m elsewhere	None up to 31.8.2019. From 1.9.2019, stamp duty value of the unit not above Rs 45 lakh
Carpet area (RERA)	Real Estate (Regulation and Development) Act 2016, s.2(k)	As above; this is the parent definition	No limit; RERA is a disclosure and registration statute	None
Carpet area (GST)	Notification No. 11/2017-Central Tax (Rate), para 4(xvi), inserted by Notification No. 03/2019-Central Tax (Rate) dated 29 March 2019	Carpet area, taking “apartment” from RERA	60 sq m in metropolitan cities; 90 sq m in other cities or towns	Gross amount charged not more than Rs 45 lakh, the gross amount including the land component, preferential location, development, parking and common facility charges
Carpet area (PMAY-U)	PMAY-U Scheme Guidelines, January 2021 (MoHUA)	Carpet area	EWS up to 30 sq m; LIG up to 60 sq m; MIG-I up to 160 sq m; MIG-II up to 200 sq m	Income bands, not price

Two notes on the table. The metropolitan cities in the income tax and the goods and services tax measures are the same eight and are described in almost identical words, which is no accident. But the money test is not the same at all: income tax looks at the stamp duty value of the unit, while the goods and services tax looks at the gross amount charged, expressly including the land component, preferential location charges, development charges, parking charges and common facility charges. The goods and services tax then values the supply by deducting a deemed one third for the land, so the two tests differ not only in what they measure but in how the measured amount is arrived at. A developer charging Rs 44 lakh all in, in a locality where the circle rate for the unit is Rs 47 lakh, is inside the goods and services tax definition and outside the income tax condition. The reverse case, a unit sold at Rs 46 lakh where the stamp duty value is Rs 43 lakh, is inside the income tax condition and outside the goods and services tax one.

For completeness, the housing ministry’s January 2021 bands in the table are income-group bands and not price caps: up to thirty square metres of carpet area for the economically weaker section, up to sixty for the low income group, up to one hundred and sixty for middle income group I and up to two hundred for middle income group II.

And the housing ministry’s figures have moved. The January 2021 guidelines carry the bands in the table; the PMAY-U 2.0 Scheme Guidelines of September 2024 replace them, with a single middle income group band, an affordable house defined as up to sixty square metres in metros and ninety elsewhere with a house value up to Rs 45 lakh, and an interest subsidy carpet area of up to one hundred and twenty square metres. Any table that quotes the housing ministry’s figures has to say which generation of the scheme it is quoting.

Plot size, and the clause (2)(e) condition that reverses Vandana Properties

Section 80-IB(10)(b) required that “the project is on the size of a plot of land which has a minimum area of one acre”. Section 80-IBA(2)(d) requires a plot of not less than one thousand square metres in the named cities and two thousand square metres elsewhere. One acre is about 4,047 square metres, so the section 80-IBA thresholds are substantially lower, which is consistent with a provision aimed at smaller urban projects.

The leading authority on the older clause is CIT-25 v. Vandana Properties, Bombay High Court, Devadhar and A.R. Joshi JJ, 28 March 2012. Two holdings in paragraph 24 do the work: “Section 80IB (10)(b) specifies the size of the plot of land but not the size of the housing project”, and “The Section does not lay down that the plot having minimum area of one acre must be a vacant plot.” At paragraph 27 the Court added that “it is immaterial as to whether any other housing projects are existing on the said plot of land or not”, and at paragraph 29 that “it is not the mandate of the Section that the housing project must be on a vacant plot of land”. The Gujarat High Court followed it in Pr. CIT v. Nagjua Developers, 11 June 2019, where the Revenue’s case was that two projects on one parcel were a single composite project and the Court answered, at paragraph 14, that “They are separate by time, space and statutory approvals and even in designs”.

Here is the point that most writing on section 80-IBA misses. Clause (2)(e) of section 80-IBA provides that “the project is the only housing project on the plot of land as specified in clause (d)”. There is no such condition anywhere in section 80-IB(10). So the very proposition that won Vandana Properties, that other projects on the plot are immaterial, is reversed by express words for a section 80-IBA project. A developer who builds a second qualifying tower on the same plot does not get two deductions and may well lose one; a developer who has already built on part of a plot and then undertakes an affordable project on the rest has to confront clause (2)(e) directly.

Two sub-questions follow and neither has been litigated. First, what is “the plot of land” when the developer owns a contiguous holding and carves out a part for the affordable project: is the plot the whole holding or the demarcated sub-plot? The assessee’s answer is that the plot is whatever the competent authority treated as the plot when approving the building plan, since clause (d) is tied to the plot on which the approved project stands. The Revenue’s answer is that a developer cannot create a qualifying plot by drawing a line on a larger holding, and that the land revenue record is the natural measure. Nothing decides it.

Second, must the plot be contiguous? No decision located rules on whether the minimum area may be assembled from separate survey numbers. Nagjua Developers expressly does not decide it. Under the older section the Madras High Court in CIT v. Voora Property Developers Pvt Ltd, 9 March 2015, accepted that six blocks with six separate plan permits on land of one acre and 6.5 cents satisfied the one acre requirement in the aggregate; the special leave petition against it was disposed of in terms of the Veena Developers order on 16 December 2015, and the decision is taken up again in the next section. Aggregation across separately permitted blocks on one holding is not the same question as aggregation across non-contiguous parcels, and the second remains open.

There is also a recent decision running the other way on facts that developers will recognise. In Smt. Parayarukandy Vettath Hemalatha v. DCIT, Kerala High Court, ITA Nos. 113 and 114 of 2026, 7 September 2026, the assessee had reserved 117.5 cents for a project, later took back 46.93 cents and built a four thousand square foot house for herself on it, reducing the project land to 70.57 cents. The Court dismissed her appeals for want of a substantial question of law, observing at paragraph 17 that she “resiled from it a few years later” and that the project “stood attenuated to 70.57 cents, by deliberate action”, and at paragraph 18 that the provision “is intended solely to incentivise affordable housing and not residential houses for an individual”. It is a decision on its own facts and it frames no question of law, but it is worth citing for a point of general application: the land committed to the project is not a figure fixed once at approval and forgotten.

The same judgment contains a sentence that anyone relying on the Bombay phased development line must read. At paragraph 22 the Kerala High Court recorded, of the Vandana Properties position on phases, “Going by Vandana Properties (supra), this view can be contested; but would be of no consequence now because,” the matter had become academic. A High Court saying in terms that the view can be contested is not authority against it, but it is a warning that the Bombay position is not universally accepted.

Phases, towers and separate approvals: one project or several, and why the answer reverses

Almost no affordable project of any size is built in one go, and the question whether a phase or a tower is a separate housing project decides four separate things. Under section 80-IB(10) it decided whether a later phase was inside the 31 March 2008 approval window, and whether compliance was tested block by block or across the whole. Under section 80-IBA it decides when the five year completion clock starts, and it runs into clause (2)(e), which has no counterpart in the older section and requires the project to be the only housing project on the plot.

The statute fixes one half of it. The proviso to clause (2)(b) provides that where approval is obtained more than once, the project is deemed approved on the date the building plan was first approved. The same rule is in the Explanation to section 80-IB(10)(a). So repeated approvals of one project do not reset the clock, and the Bombay High Court held in Vandana Properties at paragraph 22 that “the said Explanation would not apply where the approval is granted to different housing projects”. The whole question is therefore whether there is one project or two, which is a question of fact.

And on that question there is no agreed test. The fullest statement is the Gujarat High Court in Nagjua Developers, where two developments on one parcel were held separate because, at paragraph 14, “They are separate by time, space and statutory approvals and even in designs”, the fifth factor being separate books of account. The Karnataka High Court went further in Brigade Enterprises, holding at paragraph 17 that an “individual residential block has to be considered as separate project”. The Madras High Court went the opposite way on facts that look the same: in Voora Property Developers six blocks with six separate plan permits on one acre and 6.5 cents were treated as one project and the Court allowed “100% deduction on the entire project approved by the Local Authority”, holding that the deduction “cannot be denied … merely because the assessee had obtained separate plan permits for the six blocks”. That is the reverse of the same Court’s approach in Visvas Promoters, where the deduction was confined “to the extent of each of the blocks satisfying the conditions”. The two Madras decisions can be reconciled only on their facts, and the Kerala High Court has recorded, of the Bombay position on phases, that “Going by Vandana Properties (supra), this view can be contested”.

Under section 80-IBA the incentives reverse, and this is the part that is new. Every one of those decisions was given in a setting where treating a block as a separate project helped the assessee, because it confined a breach to one block. Clause (2)(e) turns that round. If each tower on a plot is a separate housing project, then each of them fails clause (2)(e), because none of them is the only housing project on the plot. If the towers together are one project, clause (2)(e) is satisfied, but the five year clock runs from the first approval of the building plan for the whole, the completion certificate has to be for “the project as a whole”, and a breach anywhere is a breach in the one project the deduction is claimed on. A developer phasing a section 80-IBA project therefore wants the opposite answer from the one the section 80-IB(10) assessees were fighting for, and the Revenue can be expected to argue whichever way defeats the claim: separate projects where clause (2)(e) is in issue, one project where completion or an oversized unit is in issue.

What to do about it before the plans go in. Decide at the outset whether the development is one project or several, and make the documents say the same thing throughout: the approval applications, the real estate regulatory registration, the books of account, the agreements for sale and the completion certificate applications. Where the answer is one project, apply for a single approval covering the whole and accept that the clock runs from it. Where the answer is several, they must be on separate plots as clause (2)(d) measures a plot, and the separation has to be real on the Nagjua Developers factors, time, space, statutory approvals, design and books. What cannot be defended is a development run as one project for commercial purposes and presented as several for the deduction, or the reverse.

No decision on any of this under section 80-IBA could be located.

Floor area ratio: the condition nobody has litigated

Clause (2)(h), or clause (i) of the substituted set for a later project, requires the project to utilise not less than ninety per cent of the permissible floor area ratio in the metropolitan areas and not less than eighty per cent elsewhere. Section 80-IBA(6)(c) defines floor area ratio as “the quotient obtained by dividing the total covered area of plinth area on all the floors by the area of the plot of land”, which is an awkward formulation (“the total covered area of plinth area”) but workable.

Nothing like this condition exists in section 80-IB(10), and no authority of any level on it could be located. That makes it the most exposed condition in the section, for three reasons.

First, it is a condition the developer cannot fully control. The permissible floor area ratio is fixed “under the rules to be made by the Central Government or the State Government or the local authority, as the case may be”, and those rules change. A project approved in 2018 against a then permissible ratio, where the local authority later increased the permissible ratio (as several authorities have, through premium floor space index and transferable development rights regimes), may find that the constructed area which was ninety-five per cent of the old permissible ratio is seventy per cent of the new one. Is the condition tested against the ratio permissible at approval, at completion, or in each year of claim? The statute does not say. The assessee’s answer is that a condition which the developer must satisfy by building has to be tested against the ratio that governed when the building plan was approved, because nothing else is capable of compliance. The Revenue’s answer is that clause (2)(h) is in the present tense (“the project utilises”) and that the permissible ratio is whatever the rules permit, full stop. The assessee has the better of it, but there is nothing to cite.

Second, the numerator is doubtful. “The total covered area of plinth area on all the floors” is not a term of art in any municipal regulation, and local authorities compute floor space index on bases of their own, variously including or excluding staircases, lift wells, service areas, refuge areas, parking floors and balconies. A developer whose local authority certificate shows ninety-two per cent utilisation on the authority’s own basis may show eighty-six per cent on the section 80-IBA basis, or the reverse.

Third, there is a decision under the older section which the Revenue will use by analogy and which cuts in an unexpected direction. In CIT-I v. Moon Star Developers, Gujarat High Court, Kureshi and Sonia Gokani JJ, 5 March 2014, the Revenue segregated the profit attributable to unutilised floor space index and denied the deduction on that part. The Court accepted the segregation, holding at paragraph 31 that while “section 80IB(10) of the Act does not provide that for deduction, the undertaking must utilize 100% of the FSI available”, and that “Marginal under-utilization of FSI certainly cannot be a ground for rejecting the claim”, nonetheless “in cases where the utilization of FSI is way short of the permissible area of construction” a bifurcation “must be resorted to”; and at paragraph 33 that “Mere sale of open land or unused FSI as part of the housing project where utilization of the FSI is way short of permissible limits cannot be said to have been derived from such housing project.” The question was answered in favour of the Revenue.

Both sides can use that. The Revenue will say that Moon Star Developers shows that under-utilisation of floor space goes to the root of whether profit is “derived from” the housing project, and that section 80-IBA, having made utilisation an express condition, is a fortiori. The assessee will say the opposite: that Moon Star Developers was a decision made necessary by the absence of any floor space condition in section 80-IB(10), that where Parliament has now specified the permissible shortfall (ten per cent in a metropolitan area, twenty per cent elsewhere) it has fixed the line, and that a project meeting the specified percentage cannot then have its profits bifurcated on a judicial notion of what is “way short”. The assessee’s argument is the better reading of a statute that now contains the number. Nobody has run it.

Note also the caveat the Gujarat High Court itself entered at paragraph 31: a case may stand on a different footing where the assessee shows special grounds for under-utilisation, and the Court instanced height restrictions and overhead high tension wires. A developer who cannot meet the ninety or eighty per cent because of an aviation height restriction, a heritage control line or a service corridor should put the restriction on the record at the outset, because it is the only material that has ever been held to matter.

The Rs 45 lakh stamp duty value cap, and the date nobody fixed

For a project approved on or after 1 September 2019, clause (g) of the substituted set requires that “the stamp duty value of a residential unit in the housing project does not exceed forty-five lakh rupees”. Section 80-IBA(6)(f) defines stamp duty value as “the value adopted or assessed or assessable by any authority of the Central Government or a State Government for the purpose of payment of stamp duty in respect of an immovable property”.

No decision of any level on this condition could be located. Four questions arise on it and all four are open.

At what date is the stamp duty value tested? The condition is in the present tense and attaches to a unit in the project. Circle rates rise, often sharply, and in many States they are revised annually. A unit whose stamp duty value was Rs 43 lakh when it was allotted in 2020 may have a stamp duty value of Rs 52 lakh when the conveyance is registered in 2025. There are at least three candidate dates: approval of the project, allotment or agreement, and transfer or registration. There is a fourth, which nobody argues and which has something to be said for it: the date of the completion certificate, which is when the unit comes into existence as a residential unit in the project at all, and which the Act adopts as the testing date for a landowner’s capital gain in section 45(5A) and as the start of the window in section 23(5). The assessee’s argument for the agreement date is that the developer fixes his price against the circle rate then prevailing, that the whole purpose of the condition is to confine the incentive to units sold in the affordable band, and that the Act elsewhere adopts the agreement date for exactly this reason: section 43CA(3) permits the stamp duty value on the date of the agreement to be taken where the agreement date and the registration date differ, subject to the banking channel condition in section 43CA(4). The Revenue’s argument for the registration date is that clause (g) contains no agreement-date rule of its own, that where Parliament wanted one it wrote one (as in sections 43CA, 50C and 56(2)(x)), and that its absence from clause (g) is deliberate. The Revenue has a second textual point and it is in the definition. Section 80-IBA(6)(f) defines stamp duty value as the value “adopted or assessed or assessable by any authority of the Central Government or a State Government for the purpose of payment of stamp duty in respect of an immovable property”. “Adopted” and “assessed” are words about an instrument that has been presented for stamping; only “assessable” is capable of operating on a unit that has not been conveyed. So the definition, read as a whole, is a definition keyed to a transfer, and a condition that borrows it takes that timing with it. The assessee’s answer is that “assessable” is there precisely so that the value can be ascertained without a transfer, and that it is the operative word for a unit the developer has not sold. The assessee has the better policy argument and the Revenue has the better textual one. This is the single most likely point of first-instance dispute as section 80-IBA assessments mature.

Is the test unit by unit or project wide? The words are “a residential unit”, singular. On one reading every unit in the project must be at or below Rs 45 lakh, and a single unit above it means the project does not fulfil the condition, so the project is not a qualifying housing project at all and the deduction fails entirely. On the other reading the condition qualifies a unit, in the way the Bombay High Court read section 80-IB(10)(c) in Kumar Builders Consortium, and the consequence of a breach is confined to the offending unit. This is the pro rata question in another dress and is dealt with below.

Does the condition bite on the developer’s own retained units? A developer retaining a unit for its own use has not allotted it, but the unit is still “a residential unit in the housing project”. If its stamp duty value exceeds Rs 45 lakh, the condition reads as breached even though nothing was sold.

What is the interaction with section 43CA? This is the most commercially dangerous part of the clause and it is taken up in its own section below, but the shape of it should be stated here. Suppose a developer sells a unit for Rs 41 lakh in a locality where the stamp duty value is Rs 47 lakh. Clause (g) is breached, because the stamp duty value exceeds Rs 45 lakh. And section 43CA substitutes the stamp duty value of Rs 47 lakh as the full value of consideration, because Rs 47 lakh exceeds one hundred and ten per cent of Rs 41 lakh. The developer is taxed on a profit it never earned, on a project whose deduction it has just lost. Two provisions keyed to the same circle rate, pulling in the same direction, and no relief in either for the fact that the price actually charged was well inside the affordable band.

Nothing in the 2025 Act touches this condition. Section 142 tests eligibility against section 80-IBA “as if the said Act had not been repealed”, so clause (g) of the substituted set, the definition of stamp duty value in section 80-IBA(6)(f) and the four open questions above are the operative law for a claim made for tax year 2026-27. The provision that pulls in the same direction, however, has changed: the counterpart of section 43CA is section 53 of the 2025 Act, and it has no residential unit carve-out of any kind.

One unit per family: the only condition on which section 80-IBA has been decided

Clause (2)(g), renumbered (h) for a project approved on or after 1 September 2019, provides that “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 equivalent in section 80-IB(10) is wider in its reach and differently drafted. Clause (e) there provides that “not more than one residential unit in the housing project is allotted to any person not being an individual”, which catches companies, firms and trusts. Clause (f) then deals with individuals and extends to the individual, the spouse, the minor children, “the Hindu undivided family in which such individual is the karta”, and “any person representing such individual, the spouse or the minor children of such individual or the Hindu undivided family in which such individual is the karta”. Section 80-IBA names only the individual, the spouse and the minor children. Two gaps follow on the face of the text: section 80-IBA says nothing about multiple allotments to a non-individual, and nothing about a Hindu undivided family or a nominee. A company buying four units in a section 80-IBA project does not breach clause (2)(g) at all, on the words, whereas it would breach section 80-IB(10)(e). Whether that was intended is not clear; what is clear is that it is what the clause says.

This is the condition on which the only substantive section 80-IBA decision was given. In DCIT, Central Circle 3(4) v. Sunteck Realty Limited, ITA Nos. 7882 and 7883/Mum/2025, the “G” Bench at Mumbai (Sandeep Gosain, Judicial Member, and Prabhash Shankar, Accountant Member) pronounced on 15 September 2026 on a deduction of Rs 57,83,81,990 claimed on a project called Sunteck West World 1. The Assessing Officer’s case was that more than one unit had gone to the same individual or family in nine instances and that the whole deduction therefore failed. The Tribunal recorded at paragraph 21 the proposition it took from the jurisdictional High Court, “that if an isolated flat or unit infringes the prescribed conditions, the deduction cannot be denied to the entire housing project in its entirety; rather, the AO is required to work out a pro-rata deduction in respect of the compliant residential units”, and at paragraph 22 that out of 1,205 flats “the allegation of allotment to family members stood restricted to one solitary instance, namely Flat Nos. 1901/1902”, and that the Commissioner (Appeals) “correctly directed the AO to verify the primary registered agreements and limit the proportionate denial of deduction strictly to the non-compliant flat”.

Two cautions before that order is cited as the answer. First, it is a Tribunal order, and what it upheld was a direction to verify rather than a finding on how many units were non-compliant. Second, and more importantly, the jurisprudence it relies on is the Bombay line on section 80-IB(10)(c), and clause (c) is worded as a qualification of a unit: “the residential unit has a maximum built-up area of one thousand square feet”. That is what let the Bombay High Court say in Kumar Builders Consortium that “clause ‘c’ only qualifies an eligible residential unit and no more”. Section 80-IBA(2)(g) is not worded that way. It is a prohibition addressed to the project: no other residential unit in the housing project shall be allotted to the same family. The textual difference is unexamined in the Sunteck Realty order and it is the obvious Revenue argument on appeal. The order should be cited for what it is, the only decision on the point, and not described as settling it.

There is a practical dimension too. A developer cannot always know that two allottees are husband and wife, or that a buyer is the minor child of an earlier buyer. The clause imposes no due diligence standard and provides no saving for a breach the developer could not have detected. The protective step is documentary: a declaration from every allottee, at the time of allotment, that no other unit in the project stands allotted to the allottee, the spouse or the minor children, kept on the project file. It will not cure a breach but it converts a disallowance into a question about one unit rather than a question about the developer’s whole record.

Two flats knocked into one, and why it is the same question twice. The commonest way an affordable project fails is not an oversized flat; it is an allottee who buys two adjoining units and opens a door between them. On the facts of Sunteck Realty the surviving allegation was precisely that, two numbered flats, 1901 and 1902, in the hands of the same family. Clause (6)(e) decides which condition is breached and the answer is binary. If, after the work, the two units are not “distinctly separated from other residential units within the building” and the occupant passes between them without going back into a shared hallway, there is one residential unit, the family condition is not breached at all, and the question becomes whether the carpet area of that single unit exceeds sixty or ninety square metres, which on a combination of two qualifying units it almost always will. If the two remain distinctly separated, with their own entrances from the hallway, there are two residential units, each inside the carpet area limit, and the breach is of the family condition and nothing else.

Two consequences follow for a live file. The first is that a developer cannot be indifferent to what a purchaser does after possession: a combination carried out by the buyer, with the developer’s consent in the agreement or in the society’s resolution, converts a compliant project into one with an oversized unit. The protective step is a covenant in the agreement for sale prohibiting the combination of units without the developer’s written consent, and a record of consent refused. The second is that the Revenue has a choice of arguments and will take whichever is worse for the developer, so a reply that answers only the family condition leaves the carpet area point open. Answer both, in the alternative, and say which reading of clause (6)(e) is being adopted and why.

Nothing decides the point. No authority on clause (6)(e) could be located, and the Sunteck Realty order does not discuss it.

Pro rata or all or nothing: the question the whole subject turns on

Every condition examined above raises the same question at the end: if some units comply and some do not, does the developer lose the deduction on the project or only on the units? The answer determines whether a single over-sized flat in a thousand unit project is a rounding error or a catastrophe, and it is not settled. It is also not going away with the repeal: because section 142 of the 2025 Act imports section 80-IBA by reference rather than re-enacting it, this dispute will be fought under the new Act on the words of the old one.

The case for the assessee rests on a line of High Court decisions under section 80-IB(10)(c).

The Madras High Court began it. In CIT, Chennai v. Arun Excello Foundations Pvt Ltd, 18 October 2012, the Court held at paragraph 37 that “on a reading of the provision, we hold that the assessee would not be entitled to have the benefit of 100% absolute deduction under Section 80-IB(10) of the Act in respect of the entire project, but would be entitled to pro-rata deduction on the units satisfying the condition under Clause (c)”. The relief was expressly read into the provision as a matter of construction: paragraph 41 says the proportionate relief “has to be read into the provisions” so that the deduction provision is sustained. The same Court followed it in CIT, Madurai v. Visvas Promoters Private Limited, 12 November 2014, holding that the assessee is entitled to the deduction “in respect of all the blocks forming part of the projects called Agrini and Vajra, but to the extent of each of the blocks satisfying the conditions under Section 80-IB(10) on a proportionate basis”, though that judgment contains no independent reasoning and simply follows the Court’s own earlier decision in the same assessee’s cases, which could not be located.

Karnataka joined it. In CIT v. Brigade Enterprises Ltd, 22 September 2020, the Court reasoned at paragraph 16 that “the Legislature has used the expression ‘residential unit’” and “has specifically omitted to use the expression ‘each’”, so that “On plain reading of clause (c) of Section 80IB(10) of the Act, it is evident that the same does not exclude the principle of proportionality in any manner.” At paragraph 17 it went further and held that an “individual residential block has to be considered as separate project”. The same Court had reached the same result in Pr. CIT v. Oceanus Dwellings Pvt Ltd, 8 March 2017, reproducing an earlier unreported order which had said “Only with reference to the flats which are more than the prescribed limit, the assessee will lose the benefit.”

Bombay joined it last and most clearly. In Pr. CIT-4, Pune v. Kumar Builders Consortium, Dhiraj Singh Thakur and Abhay Ahuja JJ, ITA No. 82 of 2018, pronounced 18 July 2022, the Court held at paragraph 8 that “clause ‘c’ only qualifies an eligible residential unit and no more and further that if there is such a residential unit, which conforms to the requirement as to size in a housing project, all other conditions being fulfilled, the benefit of deduction cannot be denied in regard to a such residential unit”, and that “Section 80IB(10), nowhere even remotely aims to deny the benefit of deduction in regard to a residential unit, which otherwise conforms the requirement of size at the cost of an ineligible residential unit with a built-up area of more than 1500 sq.ft.” It followed its own earlier decision in Devashri Nirman LLP v. ACIT, reported at (2020) 429 ITR 597, which could not be located independently and should be cited only as the decision Kumar Builders Consortium followed.

That line has been carried forward. On 17 July 2026, in Pr. CIT (Central) v. Gera Realty Estates, ITA No. 208 of 2024, a Bombay Division Bench (G.S. Kulkarni and Aarti Sathe JJ) considered three Revenue questions on clause (c), ten flats having exceeded fifteen hundred square feet, held that “the issue is no more res integra” in view of Kumar Builders Consortium and the co-ordinate Bench decision in Sukhwani Chawal Combine, and concluded that “we find no substantial question of law arises for consideration in this appeal. The appeal is accordingly rejected.” It is a dismissal at the admission stage, so its weight is the weight of the two decisions it follows, but it is the most recent statement of the Bombay position and it shows the Revenue still contesting the point in 2026.

The case for the Revenue is shorter and higher.

It is answer (d) in Brahma Associates: “Since deductions under Section 80IB(10) is on the profits derived from the housing projects approved by the local authority as a whole, the Tribunal was not justified in restricting Section 80IB(10) deduction only to a part of the project.” The Bombay High Court immediately added that because the assessee had accepted the Tribunal’s part-project allowance it would not disturb it, so the proposition did not change the result in that case. But it is a holding, it is the strongest textual authority there is against unit by unit apportionment, and the Supreme Court in Veena Developers said “We are in agreement with the aforesaid answers given by the High Court to the various issues”, clarifying only direction (b). Answer (d) therefore carries an approval of the Supreme Court, as part of a set.

The Revenue has a second limb and it is not an authority on section 80-IB(10) at all; it is the canon of construction. A provision granting a deduction is an exception to the charge, the Revenue will say, and on the Constitution Bench decision in Commissioner of Customs v. Dilip Kumar & Co. a provision of that kind is construed strictly and an ambiguity in it is resolved in favour of the Revenue and against the person claiming it. That is the Revenue’s answer to every purposive argument in this article, and it is not hypothetical: it is the Revenue’s own third question of law in Gera Realty Estates, where it was put as the proposition that “exempting provisions providing for exemption/deduction have to be construed strictly in terms with the language used therein and if there is any doubt, the benefit should go in favour of the revenue”, citing Dilip Kumar and Novapan India Ltd. The Bombay High Court did not answer it, because it rejected the appeal on the ground that the pro rata question was no longer res integra.

The assessee’s answer to that is in two parts and should be given in that order. The first is that the strict construction canon applies to the question whether the assessee falls within the provision, and that once he is within it the provision is construed so as to achieve its purpose; an incentive to build affordable housing is not an exemption from the charge in the sense Dilip Kumar was addressing, which was an exemption notification in a customs tariff. The second is that a canon for resolving ambiguity has nothing to operate on where the statute supplies the answer, and on the pro rata question section 80-IBA does supply an answer: sub-section (4) reverses the whole deduction, in terms, for one default and for no other. A rule of strict construction cannot be used to add a consequence that Parliament provided for one condition and withheld from the rest.

The honest qualifications are three, and an advocate who does not state them will be made to. Answer (d) was given in a commercial user context, for the pre-1 April 2005 period, and the question of unit built-up area was not before the Court. Veena Developers is a daily order disposing of special leave petitions with a clarification rather than a reasoned judgment, and the Court’s statement that it was “in agreement with the aforesaid answers given by the High Court” is not, on the orthodox view, a declaration of law under Article 141 any more than the dismissal of the special leave petitions in Sankhla Polymers is. What it does is leave the Bombay High Court’s answers standing with the Supreme Court’s approval recorded, which is a good deal more than the pro rata decisions have on their side and a good deal less than a judgment. And none of the Madras, Karnataka or Bombay pro rata decisions engages with answer (d) at all; they do not distinguish it, they do not mention it.

Gujarat has gone the other way, and it is the only High Court to have apportioned against an assessee. Moon Star Developers, discussed above, bifurcated the profit attributable to unutilised floor space index and answered the question in favour of the Revenue. And in ACIT, Vadodara v. Kirti Corporation, 27 April 2015, the Gujarat High Court admitted as a substantial question of law whether the Tribunal was right in “directing the A.O. to allow deduction u/s 80IB(10) of the IT Act proportionately on the completed units of the project without appreciating the fact that the assessee is eligible for deduction u/s 80IB(10) of the Act only when all the conditions of the section 80IB(10) in respect of ‘entire project’ is completed”. That is an admission order and decides nothing, but it shows the question was live and arguable in that Court as late as 2015, and no decision of it was located.

So the state of the point is this. No Supreme Court decision squarely on unit by unit apportionment under clause (c) could be found. Three High Courts allow it, one has apportioned against the assessee on a different condition and admitted the contrary question, and the project-level holding in Brahma Associates carries a Supreme Court approval that the pro rata decisions do not confront. It must be written and argued as split and open. Any submission that pro rata is settled in the assessee’s favour invites the Brahma Associates answer and has no reply ready.

For section 80-IBA the position is worse for the assessee, and this is the part of the analysis that is new. The pro rata reasoning in every one of those decisions is built on the words of clause (c) of section 80-IB(10), which qualifies a unit by its area. Section 80-IBA(2) is not drafted that way. Its clauses are conditions that the project must fulfil: the project is on a plot of a stated size; the project is the only housing project on the plot; the carpet area of the residential unit comprised in the housing project does not exceed a figure; no other residential unit in the housing project shall be allotted to the same family; the project utilises not less than a stated percentage of the floor area ratio. The subject of almost every clause is the project. The opening words reinforce it: “a housing project shall be a project which fulfils the following conditions”. On a strict reading, a project that does not fulfil a condition is not a qualifying housing project at all, and sub-section (1) never engages.

The assessee’s answers to that are real and should be made. The first is purposive: a construction that destroys a hundred crore rupees of relief because one flat in twelve hundred went to a buyer’s wife is absurd, and the Madras High Court’s reasoning in Arun Excello Foundations, that proportionate relief must be read in so that the provision is sustained, applies with more force where the consequence is more extreme. The second is that clause (2)(f) of section 80-IBA, like clause (c) of section 80-IB(10), is expressed in terms of “the residential unit comprised in the housing project”, which is unit language and not project language, so at least the carpet area condition is capable of the Kumar Builders Consortium reading. The third is sub-section (4), which shows that where Parliament wanted a total reversal it said so, in terms, and only for failure to complete; the absence of a similar provision for a breach of any other condition suggests that the other conditions were not intended to operate as all or nothing. That third argument is the best of them and it has not, so far as this article could establish, been made in any reported decision.

Completion within five years, and the clawback that has no counterpart

Clause (2)(b) requires that “the project is completed within a period of five years from the date of approval by the competent authority”. Then sub-section (4):

“(4) Where the housing project is not completed within the period specified under clause (b) of sub-section (2) 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 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.”

Four features of that provision should be noticed because together they make it the sharpest edge in the section.

It is complete. The whole of the deduction claimed and allowed in one or more previous years comes back, not the part attributable to incomplete units.

It is automatic on the expiry of the period. No order is needed to withdraw the earlier allowance and no reassessment of the earlier years is required, because the charge falls in the later year; the earlier assessments stand as they are.

It is charged as business income of the year the period expires, which means it cannot be sheltered by a capital loss and is itself exposed to the minimum tax computation of that year.

And it has no counterpart in section 80-IB(10). The older section had no clawback at all. That is the reason most of the completion jurisprudence is of limited use to a section 80-IBA developer, and it is worth seeing why.

Three consequences follow which the sub-section does not address and no decision resolves.

What the deemed income can be set against. The reversal is “income … chargeable under the head ‘Profits and gains of business or profession’”, so it is business income of that year and, being business income, it is available for set off against a business loss or an unabsorbed depreciation allowance of the same or an earlier year in the ordinary way under sections 70 to 72. It cannot be set against a capital loss. What it cannot be set against, on the words of sub-section (5), is a fresh section 80-IBA claim on the same profits, and for a company it enters the computation of regular tax while leaving book profit untouched, because the reversal is a tax fiction and not an accounting entry. So a company whose project fails to complete can find itself paying regular tax on the reversal in a year in which its book profit is nil.

Interest on the reversal. The liability arises on the expiry of the completion period, which may be months after the last instalment of advance tax for that year was payable. The assessee’s argument is that interest under sections 234B and 234C cannot run on a liability created by a deeming provision keyed to an event that had not happened when the advance tax was due, and that it was not reasonably able to estimate it. The Revenue’s argument is that the expiry of a five year period fixed at approval is the most foreseeable event there is, and that sections 234B and 234C are compensatory and admit of no such exception. No decision on the point under sub-section (4) could be located.

“Claimed and allowed”. Sub-section (4) reverses “the total amount of deduction so claimed and allowed in one or more previous years”. A deduction claimed and disallowed is not within it, and a deduction allowed in part is reversed in part. Where an earlier year’s deduction is itself under appeal when the completion period expires, the amount “allowed” is not yet ascertained, and the orderly course is to quantify the reversal on the figures as they stand, disclose the position, and rectify when the appeal is decided.

The completion litigation under the older section is almost entirely about whether a condition inserted with effect from 1 April 2005 could be applied to a project approved earlier. That question was answered at the highest level in CIT-19, Mumbai v. Sarkar Builders, Supreme Court, Sikri and Nariman JJ, Civil Appeal No. 4476 of 2015 and seventeen connected appeals, judgment of 15 May 2015. The Court held, in relation to clause (d), at paragraph 19, that “the only way to resolve the issue would be to hold that clause (d) is to be treated as inextricably linked with the approval and construction of the housing project and an assessee cannot be called upon to comply with the said condition when it was not in contemplation either of the assessee or even the Legislature, when the housing project was accorded approval by the local authorities”, and at paragraph 20(g) that “by necessary implication, the said provision has to be read prospectively and not retrospectively”. The operative conclusion, at paragraph 23, was that the High Courts “take correct view that the assesees were entitled to the benefit of Section 80IB(10)”. The misspelling is in the judgment.

The test Sarkar Builders lays down is whether the condition is “inextricably linked with the approval”. That is why the decision does not automatically carry across to the completion condition in clause (a), and the article should be clear about this because the overreach is common. The Madhya Pradesh High Court in CIT v. Global Reality, 21 August 2015, said so in terms, at paragraph 22: “Clause (a) stands on a completely different pedestal. It cannot be treated as a new condition linked to the approval and construction or having retrospective effect as such.” The Allahabad High Court in CIT-I, Lucknow v. Fortuna Foundation Engineers, 7 April 2017, held at paragraph 46 that “The aforesaid clause has to be observed by Assessee even if its project stands approved before 1.4.2004”. The Delhi High Court in CIT-I v. CHD Developers Ltd, 22 January 2014, went the other way, holding at paragraph 10 that “the application of such stringent conditions, which are left to an independent body such as the local authority who is to issue the completion certificate, would have led to not only hardship but absurdity”, for a project approved on 16 March 2005. Madras avoided the conflict in CIT, Central-I, Chennai v. Jain Housing & Constructions Ltd, 2 November 2012, holding that “till 2005, there was no clause dealing with completion” so none could be read in. Allahabad in Pr. CIT v. Sahara States, Gorakhpur, 19 August 2019, decided for the assessee on the prospectivity of clause (d) and on the absence of a completion certificate requirement for a pre-2005 approval, dismissing the Revenue’s appeals against a Tribunal order that had set the reassessment aside.

None of that helps a section 80-IBA project, because for a section 80-IBA project the completion condition and the clawback were in the section from the day it applied. There is nothing retrospective to attack.

What is genuinely open is whether anything survives a partial completion. The strict reading is that sub-section (4) is unconditional: either the project was completed within the period or it was not, and if it was not, the whole deduction reverses. The deeming rule in the second limb of the proviso to clause (b) reinforces that reading, because it fixes completion by reference to “a certificate of completion of project as a whole”. Those three words are doing work, and they are the Revenue’s best answer to any partial completion argument.

Against that, there is the one High Court decision that did allow a deduction on a part that was completed and certified. In Pr. CIT-2, Thane v. Sadhana Builders Pvt Ltd, Bombay High Court, Akil Kureshi and S.J. Kathawalla JJ, 6 June 2019, out of 11,960.15 square metres permitted the assessee had completed 11,592.43 square metres, completion certificates had issued from time to time with the last on 1 December 2008, and two buildings were never built because the land had to be handed back to the landowner. The Court recorded that “The assessee had claimed deduction in respect of the income arising out of sale of construction only for which completion certificates were issued” and concluded that “we do not find any error in view of the Tribunal granting deduction under Section 80IB(10) of the Act. No question of law arises.” It is a dismissal at the admission stage, the assessee had restricted its own claim, the uncompleted buildings were abandoned for reasons outside its control, and there was no clawback provision in play. The framed question in the same judgment gives the certified area as 9,206.30 square metres, an inconsistency in the source that is worth knowing before the decision is relied on. It lays down no general rule. But it is the only verified High Court material in that direction and it is worth having.

The practical consequence for a live file is about timing and evidence rather than argument. The five year period runs from a date that is fixed by the first approval of the building plan, and the only thing that stops the clawback is a certificate of completion of the project as a whole, in writing, from the competent authority, dated within the period. Everything in the developer’s control is therefore about getting that certificate, and getting it in time, which is why the next question matters as much as it does.

One point of timing should be taken now rather than at the end of this article. The approval window closed on 31 March 2022, so for a project approved in the last years of the window the five year period expires in the tax year 2026-27 or later, which means the reversal happens after the 1961 Act has been repealed. It is then operated not by section 80-IBA(4) in terms but by section 536(2)(h) of the Income-tax Act, 2025, which charges the sum in “such subsequent tax year” and under the same head of income as the repealed Act would have charged it, namely profits and gains of business or profession. The amount, the completeness of the reversal and the year of charge are the same; the provision to cite in the computation and in the appeal is different. The text of section 536(2)(h), and the two respects in which the Finance Act, 2026 widened it, are set out below.

The completion certificate, and the reference pending in Bombay

Two provisions govern. The proviso to clause (2)(b) says 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”. Section 80-IBA(6)(b) defines competent authority as “the authority empowered to approve the building plan by or under any law for the time being in force”.

Read together they point at a single document from a single body: the authority that approved the plan has to certify that the project as a whole is complete. In practice that is not always what a developer can get. Many local authorities issue occupation certificates building by building rather than a single project completion certificate; some issue nothing at all for months after the works are done; and in several States the statutory scheme permits a certificate from a registered or empanelled architect in place of the authority’s own.

The Jodhpur Bench of the Tribunal accepted such a certificate in ITO, Udaipur v. Aasan Affordable Housing LLP, I.T.A. No. 149/Jodh/2023, pronounced 7 March 2024. The deduction of Rs 3,83,12,436 had been refused because the completion certificate came from an empanelled architect rather than from the Urban Improvement Trust, Udaipur. The Bench held that the “certificate issued by Mr. Sandeep is conclusive in nature and also accepted by Rajasthan Government which we believe so in the absence of the contrary material placed on record and thus, we hold that the said completion certificate issued by Mr. Sandeep Bhawar can not be disputed to grant the deduction to the assessee.” It is a Tribunal decision, it turned on the State’s own empanelment scheme, and it rested expressly on the absence of contrary material. It is not a general proposition that an architect’s certificate will do.

A Revenue appeal in the same assessee’s name, D.B. Income Tax Appeal No. 37/2024, was dismissed as withdrawn by the Rajasthan High Court on 3 December 2024 on the ground that the tax effect was below the monetary limit, with the proposed substantial question of law kept open. That order does not itself mention this Tribunal order, section 80-IBA or the architect’s certificate, so it cannot be stated as a fact that it is the appeal against this decision; what can be said is that the question has not been decided by that Court either.

And the question is now live before a Larger Bench. On 31 July 2026, in Pr. CIT 20, Mumbai v. Atul Properties, ITA No. 247 of 2024, concerning assessment years 2010-11 and 2011-12 and the “Blue Meadows” project, a Bombay Division Bench (Kulkarni and Sathe JJ) disagreed with the co-ordinate Bench decision in CIT v. Hindustan Samuh Awas Ltd, (2015) 377 ITR 150 (Bom), expressing the view that a mere architect’s certificate certifying completion cannot substitute the approval issued by the local authority, and referred the framed questions to a Larger Bench. The appeals were neither decided on the merits nor dismissed at admission. The outcome of that reference could not be traced for this article.

Three consequences follow, and they should be stated separately because they are different in kind.

First, in Bombay, Hindustan Samuh Awas is now of doubtful authority, and a developer whose compliance rests on an architect’s certificate is relying on a position that is under reference. That is not the same as being wrong, but it is not a position to build a disclosure on without saying so.

Second, the reference is about section 80-IB(10) and its Explanation, not about section 80-IBA. But section 80-IBA(6)(b) is, if anything, tighter: it names the authority empowered to approve the building plan, and the proviso requires a certificate of completion of the project as a whole. Whatever the Larger Bench says about the older provision will be read across.

Third, and more usefully, the elsewhere line of authority is split and the Supreme Court has twice declined to settle it. The Gujarat High Court in CIT-IV v. Tarnetar Corporation, reported at (2012) 210 Taxman 206, held that an application for the completion certificate made before the due date is sufficient compliance. The judgment itself could not be reached for this article; its effect is recorded in the Ahmedabad Bench’s order in Kirti Construction, Baroda, 13 November 2014 (a different assessee from the Kirti Corporation appeals noted earlier), which says that “the Hon’ble High Court held that the assessee had not only completed the construction two years before the final date but had applied for the building use permission”, and reproduces the Commissioner (Appeals)’ statement that “the application for obtaining completion certificate by the assessee before the due date is sufficient compliance for the grant of deduction u/s.80IB(10)”. The Revenue’s appeals against Tarnetar reached the Supreme Court as Civil Appeal No. 8121 of 2013 with Civil Appeals 1830, 1831 and 2803 of 2018, and were disposed of on 6 September 2018 by Sikri and Ashok Bhushan JJ in these words: “Delay condoned. The appeals are dismissed on the ground of low tax effect, leaving the question of law open.” Tarnetar therefore stands as a High Court decision and must never be described as approved by the Supreme Court.

The other way, Global Reality held at paragraph 26 that “issuance of completion certificate, after the cut off date by the Local Authority but, mentioning the date of completion of project before the cut off date, does not fulfill the condition specified in clause (a) of Section 80IB (10) read with Explanation (ii) thereunder”, that the requirement is “not directory”, and that “The completion certificate granted by the Local Authority must bear the date of having been issued before the cut off date.” That judgment has been stayed by the Supreme Court. In Global Estates v. CIT, SLP(C) Nos. 34997-35001/2015 and 35004-35005/2015, Nariman and Surya Kant JJ ordered on 8 July 2019 that “There shall be stay of the impugned judgment in both the aforementioned special leave petitions.” The batch was still undecided on 14 May 2025, when the only direction recorded was “List on 29.07.2025”, and no later order could be traced. So the position to state is that the judgment was stayed in 2019 and the petitions were pending as at 14 May 2025; the present status should not be asserted without checking.

Global Reality is, for that reason, the single most dangerous citation in this field. It reads as a clean Revenue authority and it is under stay. A practitioner who meets it in a Departmental submission should say so, and a practitioner who relies on Tarnetar should volunteer that the Supreme Court left the question open.

What a developer should actually do is narrower than any of this. Apply for the completion certificate well before the five year date, in writing, with proof of filing, and follow the application with reminders that are also on the record. Where the authority issues occupation certificates building by building, ask expressly for a certificate of completion of the project as a whole and record the refusal if there is one. Where the State scheme permits an architect’s certificate, obtain both, and obtain the empanelment or authorisation document for the architect at the same time, because that is the material whose absence decided Aasan Affordable Housing the other way round. Where the authority simply does not answer, the application with its date is the only thing between the developer and sub-section (4).

Who is the developer: ownership, joint development and the works contract bar

A great many affordable projects are not built by the owner of the land. The common structures are a development agreement under which the developer builds on the landowner’s land and takes a share of the units or of the revenue; a joint development agreement under which the landowner contributes land and receives constructed area; and a straightforward construction contract. The tax consequences differ sharply and the dividing line is section 80-IBA(3).

Ownership of the land is not a condition. The leading authority is CIT-I v. Radhe Developers, Gujarat High Court, Kureshi and Sonia Gokani JJ, 13 December 2011, heard with Shakti Corporation and forty-seven connected appeals. At paragraph 31 the Court held that “there is nothing under Section 80IB (10) of the Act requiring that ownership of the land must vest in the developer”, and at paragraph 32 that “It does not provide that the land must be owned by the assessee seeking such deductions.” The Madras High Court agreed in CIT v. Sanghvi and Doshi Enterprise, 1 November 2012, holding at paragraph 30 that “the deduction contemplated therein is oriented towards the project and not with reference to an assessee” and at paragraph 31 that “the provisions no where require that developers who are the owner of the land alone would be entitled”, recording that it was “in respectful agreement with the law declared by the Gujarat High Court”. No Supreme Court decision affirming or reversing Radhe Developers could be located. The reasoning is textual and applies with the same force to section 80-IBA, which likewise says nothing about ownership.

Note one qualification in Radhe Developers that is usually left out. At paragraph 41 the Court said that “the assessee had satisfied the condition of ownership also; even if it was necessary”, which makes the ownership proposition partly an alternative holding.

The works contract bar is a different matter. Section 80-IBA(3) provides that nothing in the section applies “to any assessee who executes the housing project as a works-contract awarded by any person (including the Central Government or the State Government)”. The same words, as a closing Explanation, were inserted into section 80-IB(10) by section 37(c)(iv) of the Finance (No. 2) Act, 2009 and “deemed to have been inserted with effect from the 1st day of April, 2001”. That retrospective date is worth getting right: the Gujarat High Court gives 1 April 2001 at paragraph 38 of Radhe Developers and the Finance (No. 2) Act’s own amending clause says 1 April 2001; the Madras High Court in ACIT v. Doshi Housing Limited records 1 April 2000 at paragraph 3, which is the date of a different amendment in the same Act, to section 80-IB(9).

Radhe Developers held that those particular assessees were not works contractors. At paragraph 37: “By no stretch of imagination can it be said that the assessee acted only as a works contractor.” At paragraph 42: “Assessee thus was not working as a works contract. Introduction of the Explanation to Section 80IB(10) therefore in this group of cases also will have no effect.” That is a finding on the facts of that group, and it is important to say so, because the bar remains fully available to the Revenue against an assessee who is a works contractor. No High Court decision denying the deduction on the footing that the assessee was a works contractor, or that a landowner contributing only land is not a developer, could be located for this article. The point is fact dependent and open.

The factors that decided Radhe Developers are the factors to document. The developer bore the risk and the cost of development; it had the right to deal with the constructed units; it was not paid a fee for construction. Put the opposite way, the features that make an arrangement a works contract are a fixed consideration for construction, an absence of development risk, no right in the constructed area, and no entitlement to the sale proceeds. A development agreement under which the developer receives a fixed construction fee and hands everything to the landowner is a works contract whatever it is called.

There is a reassessment dimension to this that is settled and useful. In ACIT v. Doshi Housing Limited; DCIT v. Arun Excello Foundations P Ltd, Madras High Court, 10 March 2022, the Revenue had reopened beyond four years relying on the retrospective Explanation and on a contention that the assessees had built as contractors rather than as developers. The Court held at paragraph 13 that “The contention of the learned Senior Standing Counsel for the appellants that the re-assessment is not solely based on the amendments brought to the statute, but due to the fact that the respondents herein undertook and constructed the building as a contractor and not as a developer, also cannot be sustained”, following the Gujarat High Court in Ganesh Housing that “retrospective amendment in statute would not enable the Assessing Officer to reopen an assessment beyond a period of four years”, and confirmed the quashing of the notices. It decides nothing about who was a developer; it decides that a retrospective amendment plus an allegation of contractor status will not support a late reopening. That is a section 147 point and not a section 80-IBA point, but it is the one most likely to arise on an old file.

One structural question has no answer at all. In a joint development, the landowner receives constructed units as consideration. Those units are allotted to the landowner. If the landowner is an individual and receives more than one unit, has clause (2)(g) been breached? On the words, yes: a residential unit in the housing project has been allotted to an individual and another residential unit in the same project has been allotted to the same individual. The clause contains no exception for an allotment to the landowner in consideration of the land, and the drafting gives no sign that the point was considered. The assessee’s answer must be that “allotted” in clause (2)(g) means allotted to a purchaser under the scheme of sale, not transferred to the landowner in part discharge of the consideration for the land, and that the purpose of the clause is to prevent accumulation of subsidised housing by one family rather than to catch the land transaction. That is a sound purposive argument and it has no authority behind it. A developer entering into a joint development for a section 80-IBA project should structure the landowner’s consideration in money, or in commercial area within the three per cent, or in units in a different project, rather than in multiple residential units in the eligible project.

For the landowner’s own tax position, the deferral in section 45(5A) is the governing provision for an individual or a Hindu undivided family: the capital gain is chargeable in the previous year in which the certificate of completion for the whole or part of the project is issued, and the consideration is the stamp duty value on the date of the certificate of the landowner’s share, plus any cash received. The proviso withdraws the deferral entirely where the landowner transfers the share on or before the date of the certificate. The provision does not apply to a company, a firm or a limited liability partnership landowner at all; for them the ordinary rules of year of transfer apply. In the 2025 Act the deferral is section 67(14), read with the definition of “specified agreement” in section 67(15)(b).

What is “derived from such business”: the quantum of the deduction

Sub-section (1) allows a deduction of a hundred per cent of “the profits and gains derived from such business”, the business being that of developing and building housing projects. Everything above is about whether the deduction is available. This is about how much it is, and it is the question an assessment is most likely to turn on once the conditions are satisfied, because section 80-IBA gives the Assessing Officer no machinery and leaves him nothing but those four words.

The Revenue’s route is the words, and it has one authority. Because section 80-IBA imports nothing from section 80-IA, there is no inter-unit transfer provision in sub-section (8) and no excessive profits provision in sub-section (10) to reach an inflated eligible profit with. What the Revenue has instead is the proposition that a receipt which is not “derived from” the housing project does not attract the deduction even though it is credited in the project’s own books. The Gujarat High Court applied exactly that reasoning in Moon Star Developers, holding at paragraph 33 that “What is available for deduction under section 80IB(10) of the Act is the profit of an undertaking derived from developing and building a housing project” and that “Mere sale of open land or unused FSI as part of the housing project where utilization of the FSI is way short of permissible limits cannot be said to have been derived from such housing project”. The receipts that attract the same argument on an ordinary project are these: interest on the deposit of advances from allottees; forfeited booking amounts and cancellation charges; transfer or name change charges levied on a resale before possession; club membership, car parking, maintenance and electrification collections; compensation received from a contractor or an insurer; the sale of unutilised floor space or transferable development rights; and profit on the sale of unsold stock after the project is complete.

The assessee’s answer is that the test is the first degree nexus and not the label. Where the receipt arises out of the very transaction by which the units are sold, it is derived from the business of developing and building, and the strongest cases are the collections that the agreement for sale itself provides for, because they form part of what the purchaser pays for the unit. That argument is at its weakest on interest on surplus funds, which has a source of its own in the deposit and not in the project, and at its weakest again on the sale of unused floor space, which is what Moon Star Developers decided against the assessee. The practical dividing line a developer should adopt in its own computation, before the Assessing Officer draws a worse one, is between what the purchaser pays under the agreement for the unit and what the developer earns from something other than selling units.

Allocation is the second half of the quantum, and the separate books condition is what forces it. A developer running an eligible project alongside two ineligible ones has to allocate interest, salaries, marketing and administrative overhead between them, and the condition in clause (2)(i) or (j) means the allocation is on the face of the statutory record. An allocation that loads cost on to the ineligible projects raises the eligible profit and the deduction with it, and there is no provision allowing the Assessing Officer to recompute the eligible profit as what “may be reasonably deemed to have been derived therefrom”, because section 80-IA(10) is not imported. What he can do is reject the allocation as not reflecting the books, or treat part of the receipt as not derived from the project, which is the same argument in another form. Allocate on a stated and consistent basis, record the basis in the notes to the project accounts in the first year, and do not change it.

And the year matters as much as the amount. The deduction is claimed year by year as the profit arises, so the accounting standard that fixes when revenue is recognised also fixes when the deduction falls due, and for a company it fixes the book profit on which minimum tax is charged in that year. A developer that recognises revenue on completion rather than over the construction period concentrates both the deduction and the minimum tax into the completion year. That is a cash flow point rather than an argument, and it belongs in the project model.

Sub-section (5) sets the outer limit and it is narrower than it looks. Where profits are claimed and allowed under section 80-IBA, “deduction to the extent of such profit and gains shall not be allowed under any other provisions of this Act”. So the same profit cannot be deducted twice. But unlike section 80-IA(9), which also provides that the deduction “shall in no case exceed the profits and gains of such eligible business”, section 80-IBA has no ceiling of its own at the profits of the eligible business, and nothing in the section caps the aggregate of Chapter VI-A deductions at gross total income other than section 80A(2) itself.

No decision on any of this under section 80-IBA could be located.

Separate books, the return, and the condonation line

Two conditions look administrative and are not.

Separate books of account. Clause (2)(i), or (j) for a later project, requires that “the assessee maintains separate books of account in respect of the housing project”. This is a condition of eligibility in the same list as the plot size and the carpet area, and on the project-level reading discussed above a failure to maintain them is as fatal as an oversized flat. It is also a condition that a multi-project developer fails without noticing, because the natural accounting unit in a real estate business is the division or the site, not the statutory project. The defensible position is a separate set of books, or at minimum a separate and reconcilable cost centre with its own trial balance, from the first day of the project and not reconstructed afterwards. There is no audit report prescribed for a section 80-IBA claim, as noted above, so the books are the only accounting record the claim rests on.

The return. Two provisions bar the deduction if the return goes wrong, and they are cumulative.

Section 80A(5): “Where the assessee fails to make a claim in his return of income for any deduction under section 10A or section 10AA or section 10B or section 10BA or under any provision of this Chapter under the heading ‘C.—Deductions in respect of certain incomes’, no deduction shall be allowed to him thereunder.” Section 80-IBA sits under that heading, so a claim not made in the return is not available at all.

Section 80AC is in two clauses and the difference between them matters for the earliest section 80-IBA years. Clause (i) applies to an assessment year commencing on or after 1 April 2006 but before 1 April 2018, and it names the sections it catches: section 80-IA, section 80-IAB, section 80-IB, section 80-IC, section 80-ID and section 80-IE. It does not name section 80-IBA, which was inserted with effect from 1 April 2017 and so has exactly one assessment year, 2017-18, inside clause (i)’s window. Clause (ii), for an assessment year commencing on or after 1 April 2018, drops the list and catches “any deduction … admissible under any provision of this Chapter under the heading ‘C.—Deductions in respect of certain incomes’”, which is the heading section 80-IBA sits under, and then provides that “no such deduction shall be allowed to him unless he furnishes a return of his income for such assessment year on or before the due date specified under sub-section (1) of section 139.”

So for assessment year 2017-18 there is an argument, on the words, that the section 80AC bar does not reach a section 80-IBA claim at all, because a provision that lists the deductions it catches and omits one of them cannot be read as catching it. The Revenue’s answer is that the omission is an oversight of a section inserted in the same season, that section 80AC was always intended to cover the whole of the heading and was redrafted to say so a year later, and that in any event the section 80A(5) bar on a claim not made in the return applies to the whole heading in every year and is unaffected. The assessee has the better of the first point and the Revenue is right about the second, so the argument is worth taking only where the return was late and the claim was made. No decision on it could be located.

For every later year the bar operates, and the Calcutta High Court has held it to be a mandatory precondition. In CIT, Siliguri v. Shelcon Properties (P) Ltd, Girish Chandra Gupta and Tapash Mookherjee JJ, 16 January 2014, on a return filed on 11 February 2010 for assessment year 2009-10 against a 30 September due date, the Court said: “The benefit in the present case can only be claimed in case of fulfillment of the preconditions laid down under section 80AC of the I.T. Act. When the preconditions have not been fulfilled, the benefit cannot be claimed. There is, as such, no reason to find out whether the direction is directory or mandatory. In any event, when the provision is that the benefit cannot be claimed if the return has not been filed on or before the prescribed day, in our view, it is a mandatory direction which prescribes the consequence of omission to file the return in time. The Courts cannot rewrite the law to do what is just according to them …”. Both questions were answered in favour of the Revenue. No Supreme Court decision on it could be located.

The answer to that, where the return is late, is not an argument on section 80AC. It is an application under section 119(2)(b) to condone the delay, which is where the only substantial body of High Court authority on section 80-IBA is to be found.

In Rajgreen Infralink LLP v. Pr. CIT 1, Surat, Gujarat High Court, Supehia and Pranav Trivedi JJ, 2 December 2025, an LLP had filed thirteen days after the extended deadline for assessment year 2021-22 and the section 80-IBA deduction was disallowed. The Court held at paragraph 15 that “looking to the prevailing situation at the relevant time wherein the entire nation was facing COVID-19 pandemic, in our opinion, the explanation tendered by the present petitioner in his application seeking condonation of delay of 13 days was required to be accepted”, quashed the refusal and restored the application for fresh consideration within twelve weeks. It did not itself condone the delay and it did not hold the deduction allowable. There is a later matter in the same name before the same Court, of 28 September 2026, which could not be fetched for this article and whose outcome should be checked.

In Western Arch Developers v. Pr. CIT (Central), Pune, Bombay High Court, Colabawalla and Firdosh Poniwalla JJ, 4 August 2025, the Principal Commissioner had refused condonation partly because the assessee had not documented its section 80-IBA claim. The Court set aside the order, condoned the delay for assessment year 2024-25, and directed that the portal tab be opened within four weeks so that the return could be filed and processed in accordance with law. The ratio worth taking from it is that the merits of the deduction are not a relevant ground at the condonation stage; it is not a holding that the deduction is allowable.

In Grace Gated Community v. Addl. CIT, Madras High Court, Krishnan Ramasamy J, 5 September 2024, the section 119(2) refusal was set aside for want of a personal hearing and remanded. Purely procedural, and useful for exactly that.

That is not the end of it, and the Tribunal has gone the other way on section 80-IBA itself. In Aravali Buildhomes LLP v. ACIT, ITA No. 1154/JP/2024 for assessment year 2021-22, pronounced on 4 June 2025, the Jaipur Bench allowed the assessee’s ground where a section 80-IBA deduction of about Rs 1.27 crore had been denied in an intimation under section 143(1) because the return was filed on 31 March 2022 against a due date of 15 March 2022, a delay of sixteen days. The Bench followed, among others, the Himachal Pradesh High Court in Pr. CIT v. HIMUDA, a citation that could not be verified independently for this article. The order also records the assessee’s submission that the audit report had been filed on 8 February 2022, before the due date, and a Covid related extension argument, but the Covid point is recorded as a submission and not as a finding and should not be cited as a holding. So the state of the point is a High Court decision against the assessee on section 80-IB(10) and a Tribunal decision for the assessee on section 80-IBA, and an article that tells a client the bar is absolute is overstating it.

The reconciliation argument, which nobody has had decided. Section 80AC requires a return furnished “on or before the due date specified under sub-section (1) of section 139”. Where the delay in furnishing that return has been condoned under section 119(2)(b), the assessee’s argument is that the return stands as a return furnished within the due date, that the condonation operates on the very default section 80AC is addressed to, and that a power conferred to relieve against hardship in making a claim would be pointless if the claim remained barred after it was exercised. The Revenue’s argument is that section 119(2)(b) permits the Board to admit a claim after the expiry of the period, which is a direction to entertain and not a deeming of the return as timely, that Shelcon Properties holds the consequence of a late return to be prescribed by section 80AC itself, and that a general administrative power cannot displace an express prohibition. No decision reconciling the two could be located, and the three High Court decisions in this field all stop at the condonation stage and say in terms that the merits of the deduction are for the Assessing Officer. The practical answer is to put the argument in the computation as well as in the condonation application, so that it is on the record if the claim is later disallowed notwithstanding the condonation.

The practical sequence is therefore: claim the deduction in the return, file the return by the section 139(1) due date, and if the date has been missed, apply under section 119(2)(b) at once with a specific and documented explanation rather than a formulaic one. Under the Income-tax Act, 2025 both bars are merged into section 122(5), which carries the due date condition in clause (a) and the claim-in-the-return condition in clause (b), both confined to Part C of Chapter VIII, with the return due date fixed by section 263(1). The merger is slightly narrower than the 1961 pair, since the section 10A, 10AA, 10B and 10BA extension in section 80A(4) and (5) has gone and the transitional clause in section 80AC for earlier years has gone with it, and tighter in one respect, because clause (b) requires the claim to be made in a return furnished under section 263(1) and not merely in a return of income.

The minimum tax that takes it back: section 115JB and the housing company

This is the part of the subject that practitioners discover late and clients discover last. A hundred per cent deduction does not produce a nil tax bill for a company. It produces a minimum alternate tax bill on the same profit.

The mechanism is in the structure of section 115JB. Sub-section (1) provides that where the income-tax payable on the total income as computed under the Act “is less than eighteen and one-half per cent of its book profit, such book profit shall be deemed to be the total income of the assessee and the tax payable by the assessee on such total income shall be the amount of income-tax at the rate of eighteen and one-half per cent”, and the proviso substitutes “fifteen per cent” for both occurrences for an assessment year commencing on or after 1 April 2020. Sub-section (2) directs the company to prepare its statement of profit and loss in accordance with Schedule III to the Companies Act, 2013. Explanation 1 then defines book profit as the profit so shown, as increased by a list of items lettered (a) to (k) and as reduced by a list of items numbered (i) to (viii).

Read the reductions. They are: an amount withdrawn from a reserve or provision; income to which section 10, 11 or 12 applies; depreciation other than on revaluation; an amount withdrawn from revaluation reserve to the extent of revaluation depreciation; a share in the income of an association of persons on which no tax is payable under section 86; certain income of a foreign company; notional gains and losses on the exchange of a special purpose vehicle’s shares for business trust units; royalty on a patent chargeable under section 115BBF; the aggregate of unabsorbed depreciation and brought forward loss of a company whose Board of Directors the Tribunal has suspended on the Central Government’s application, or against which an application for a corporate insolvency resolution process has been admitted; brought forward loss or unabsorbed depreciation, whichever is less, as per the books; the profits of a sick industrial company; and deferred tax credited to the statement of profit and loss.

There is no item for a Chapter VI-A deduction. There is no reference to section 80-IA, to section 80-IB or to section 80-IBA, and none to section 10AA or section 35AD. The only clauses that ever did allow a Chapter VI-A reduction were clauses (iv), (v) and (vi), which related to sections 80HHC, 80HHE and 80HHF, and they now print on the Department’s page as omitted. The annexure to Form No. 29B, prescribed by rule 40B, confirms the architecture: row 12 adds “the amount or aggregate of amounts referred to in clauses (a) to (k) of Explanation 1” and row 13 subtracts “the amount or aggregate of amounts referred to in clauses (i) to (viii)”. There is nowhere on the form to put a section 80-IBA deduction.

Explanation 1 is not the whole of the computation for a company that reports under the Indian Accounting Standards, and most developers of any size now do. Sub-section (2A) further increases book profit by amounts credited to other comprehensive income under the head “Items that will not be re-classified to profit or loss” and decreases it by amounts debited there, excluding, by the first proviso, revaluation surplus on assets and gains or losses on equity instruments designated at fair value through other comprehensive income, which are instead brought in under the second proviso in the year the asset or investment is disposed of. Sub-section (2C) then increases or decreases book profit by one-fifth of the transition amount in the year of convergence and each of the four following years. Parts B and C of the annexure to Form No. 29B exist for these adjustments. For a developer the items that matter are the fair value movements on investment property and on retained units reclassified out of inventory, and the convergence adjustments on revenue recognition. They can raise the charge in exactly the years the deduction is claimed, and they are outside the control of the person computing the deduction.

So a company with a book profit of Rs 100 and a section 80-IBA deduction of Rs 100 has a total income of nil, pays nothing on it, and then pays fifteen per cent of Rs 100 under section 115JB, plus the surcharge and cess that the relevant Finance Act prescribes. The deduction is worth eighty-five per cent of the profit in the year, not a hundred.

What the authorities say. No decision of any High Court or of the Supreme Court on section 80-IB(10) or section 80-IBA against section 115JB could be located for this article, and no CBDT circular, notification, instruction or published clarification on the point either. That nil finding should be stated rather than papered over, because a reader is entitled to know that the proposition rests on the text and on authority by analogy.

The nearest decision is Sankhla Polymers (P) Ltd v. ITO, High Court of Karnataka, D.V. Shylendra Kumar and B. Sreenivase Gowda JJ, 29 January 2013, on section 80-IB generally and not on sub-section (10). The substantial question was “Whether the tribunal erred in not adjudicating the contentions of the appellant in respect of exempted income under the provisions of section 80 IB should have been reduced while computing the books profit under section 115 JB of the Income Tax Act.” The Court held at paragraph 35: “Section 115JB, in fact, in no way either denies the benefit given under Section 80-IB or reduces the same. While the appellant-assessee can claim the benefit under Section 80-IB of the Act and it is not denied per se to the appellant-assessee, to the appellant-assessee, in the given case, the provisions of Section 115JB may be attracted or may not be attracted depending upon the nature or legal composition of the assessee.” The section 115JB questions were answered against the assessee. The special leave petitions, SLP(C) Nos. 28907-28909/2013, were dismissed by the Supreme Court on 15 January 2015 in the words “We find no reason to entertain these Special Leave Petitions, which are, accordingly, dismissed.” A dismissal in those terms is not a declaration of law under Article 141, but the judgment stands.

On a housing project specifically, the closest is a Tribunal order. In DCIT v. Gee City Builders (P) Ltd, ITAT Chandigarh (Sanjay Garg, Judicial Member, and Annapurna Gupta, Accountant Member), ITA Nos. 422 and 423/CHD/2016 and 780 and 781/CHD/2016, order of 30 April 2019, paragraph 33 dismissed the contention “that deduction provided under section 80IB(10) of the Act is to be made from the book profits of the assessee for the purpose of payment of MAT”, and paragraph 28 held that section 115JB(6) did not exempt a housing developer which was not a unit in a special economic zone. Note that sub-section (6), the special economic zone exclusion, ceased to have effect for assessment years commencing on or after 1 April 2012 by its own proviso, so it is of historical interest only. There is a companion order of the same Bench in ITA No. 4/CHD/2019, of 14 August 2019, and the two should not be cited interchangeably.

Two things about that order should be recorded because they bear on how settled the point is. It relied on the Uttarakhand High Court in SIDCUL Industrial Association and on the Karnataka High Court in Sankhla Polymers, the first of which was not verified for this article. And it declined to follow a decision of the Mumbai Bench in Neha Builders, which had been cited to it for the assessee. That decision could not be obtained for this article and nothing is asserted about what it held. What can be said is that the question has been contested at Tribunal level and decided both ways, which is a different thing from the absence of authority, and a practitioner arguing it should look for the Mumbai line before conceding.

The argument the assessee can still make, and its weakness. The assessee’s case is purposive: Parliament enacted a hundred per cent deduction to make affordable housing viable, and a minimum tax that recovers fifteen per cent of the same profit defeats the incentive to that extent. It can be put as a constitutional argument too, that an incentive available in form but not in substance is arbitrary. Sankhla Polymers met that squarely and rejected it: paragraph 37 reasoned that reading section 80-IB into section 115JB would itself produce discrimination and offend Article 14, because companies and non-corporate assessees are differently placed under the two charges.

The stronger version of the assessee’s argument is narrower and textual, and it is not about Explanation 1 at all. It is that section 115JB is a charge on book profit, that book profit is an accounting figure, and that where an accounting treatment legitimately keeps an amount out of the statement of profit and loss, it is out of book profit whether or not it would have been deductible under Chapter VI-A. That is a real avenue for a developer whose revenue recognition under the applicable accounting standard does not bring the profit into the statement of profit and loss in the year the deduction is claimed. It is an accounting argument and not a section 80-IBA argument, and it will be met in three ways: with sub-section (2)’s requirement that the accounts be prepared in accordance with Schedule III and with the consistency provisos that follow; with sub-sections (2A) to (2C), which show that where Parliament wanted an accounting figure adjusted for the minimum tax it adjusted it expressly; and with the point that a treatment which keeps profit out of the statement of profit and loss in one year brings it in in another, so the argument is about timing and not about the charge.

The Revenue’s position is simply the statute, and in this instance that is a strong place to stand. Section 115JB prescribes its own computation, lists what increases and what reduces book profit, and a Chapter VI-A deduction is not among them. There is no gap to fill.

And the same is true under the new Act. For a tax year beginning on or after 1 April 2026 the charge is section 206(1) of the Income-tax Act, 2025, at fourteen per cent rather than fifteen, and the architecture is identical: section 206(1)(c) computes book profit as the accounting profit increased by ten listed items and reduced by six, and there is no item for a Chapter VIII deduction and no reference to section 142. Everything in this section therefore carries across unchanged, at a rate one percentage point lower. What does not carry across is the credit, and that is the subject of the next two sections.

Minimum alternate tax credit, and the single project company that never gets it back

This section describes the credit as it stood under the 1961 Act, which is the law for every assessment year up to and including 2025-26 and therefore for most of the profits of most section 80-IBA projects. For a tax year beginning on or after 1 April 2026 the position is different and much worse, because the clauses of the 2025 Act that carried the credit forward were omitted before the Act ever operated. That is taken up below. Read this section as the history of a mechanism that has just been removed, and the next as the removal.

If the minimum tax were a final tax, the analysis above would make section 80-IBA worth eighty-five per cent of the profit and that would be the end of it. Under the 1961 Act it was not a final tax. Section 115JAA made it a prepayment, and the whole commercial assessment of the incentive turns on whether the prepayment comes back.

Sub-section (1A) gives credit for tax paid under section 115JB. Sub-section (2A) computes the credit as the difference between the tax paid under section 115JB and the tax payable on total income under the other provisions. Sub-section (3A) fixes the outer limit: the credit “shall be carried forward and set off in accordance with the provisions of sub-sections (4) and (5) but such carry forward shall not be allowed beyond the fifteenth assessment year immediately succeeding the assessment year in which tax credit becomes allowable under sub-section (1A)”. Fifteen years, and no interest, by the proviso to sub-section (2A). And the credit is not fixed by the original assessment: sub-section (6) increases or reduces it as an order under section 143, 144, 147, 154, 155, 245D(4), 250, 254, 260, 262, 263 or 264 increases or reduces the tax payable, so an appellate order allowing a section 80-IBA deduction that had been disallowed reduces regular tax and increases the credit for that year. Section 115JD(6) does the same for alternate minimum tax.

The conditions of set-off are where the problem is. Sub-section (4) allows the set-off “in a year when tax becomes payable on the total income computed in accordance with the provisions of this Act other than section 115JA or section 115JB”, and sub-section (5) limits it “to the extent of the difference between the tax on his total income and the tax which would have been payable under the provisions of sub-section (1) of section 115JA or section 115JB”. So the credit can only be used in a year in which regular tax exceeds minimum tax, and only up to that excess.

Now put a typical affordable housing special purpose vehicle against that. It is incorporated for one project. It claims the deduction through the construction and sale years. In every one of those years its regular tax is nil and its minimum tax is fifteen per cent, so it accumulates credit and uses none. When the project is sold out it has no further business. There is no later year in which regular tax exceeds minimum tax, because there is no later year with income at all. The company distributes and is struck off. The credit is never used, and the fifteen per cent is a final tax in substance even though the statute calls it a credit.

That is not a drafting accident so much as a consequence of the vehicle. It has three practical answers and each has a difficulty.

Do not use a single project vehicle. Run the project in a company that has other taxable business, so that there are years in which regular tax exceeds minimum tax. The difficulty is that lenders and joint venture partners usually insist on a ring-fenced vehicle, and the ring fence is what destroys the credit.

Merge the vehicle into a profitable group company before the credit lapses. Whether the credit survives an amalgamation is not answered by section 115JAA, and it is the question on which the whole of this strategy depends. The section contains one express succession provision and it is a negative: sub-section (7) says that on conversion of a private company or unlisted public company into a limited liability partnership, “the provisions of this section shall not apply to the successor limited liability partnership”. So conversion into an LLP destroys the credit expressly. Amalgamation is not mentioned.

The assessee’s argument has three strands. The first is that on an amalgamation within section 2(1B) the undertaking of the amalgamating company passes as a whole and the amalgamated company succeeds to its business; a credit for tax paid on the profits of that business is an incident of it, not a personal privilege, and the Act contains nothing that extinguishes it. The second is section 115JAA(6), which varies the credit up or down as appellate and rectification orders vary the tax; a relief that moves with the assessment of the tax paid is better understood as an attribute of that payment than as a personal concession. The third is sub-section (7) itself: it is the one succession event Parliament addressed, it destroys the credit on conversion into a limited liability partnership, and the expression of that single exclusion suggests that other successions were not intended to be caught.

The Revenue’s argument is the stronger of the two on the text. A tax credit is a statutory relief granted to the person who paid the tax, and it does not pass on a succession without words that pass it. Where Parliament wanted an accumulated benefit to survive an amalgamation it said so expressly and on conditions: section 72A carries accumulated loss and unabsorbed depreciation across, subject to the conditions in its own sub-sections and with a withdrawal provision if they are not met. There is no section 72A for minimum alternate tax credit. And sub-section (7) cuts the Revenue’s way as much as the assessee’s, because it shows that Parliament turned its mind to succession and legislated for the credit only where it chose to.

No authority on an amalgamation of a housing company holding minimum alternate tax credit was located for this article, and the pattern repeats in the new Act: sections 206(3)(d) and 206(4)(d) again disapply the transitional credit to a successor limited liability partnership on a conversion and again say nothing about an amalgamation. A group that intends to rely on the merger route should obtain the credit figure and the year-wise lapse dates before the scheme is filed, should state the credit in the scheme as an asset transferred, and should expect the question to be taken in the first assessment of the amalgamated company.

Do not claim the deduction at all. This sounds perverse and in some cases it is the right answer. A company that does not claim section 80-IBA pays regular tax on its profits, at whatever the applicable corporate rate is, and pays no minimum tax because regular tax exceeds it. A company that claims the deduction pays fifteen per cent as minimum tax and holds a credit it may never use. If the credit is worthless, the comparison is between the full corporate rate and fifteen per cent, and claiming is still better. If the credit is usable, claiming is better still. So the deduction is worth claiming in almost every case; the point of the analysis is not that claiming is wrong but that the benefit should be modelled at fifteen per cent of leakage rather than at zero, and that the leakage should be a line in the project cash flow and in the price.

And one timing point that is easy to get wrong. The credit arises in the assessment year in which the minimum tax is paid and the last year in which it can be set off is the fifteenth assessment year immediately succeeding that year. For a project whose profits arise over 2019-20 to 2024-25, the earliest tranche of credit becomes allowable in assessment year 2020-21, can still be used in assessment year 2035-36, and lapses from assessment year 2036-37. That is far enough away to be forgotten and close enough to matter, and it is a diary entry rather than an argument.

None of that arithmetic survives into the new Act for tax paid under it. The fifteen year clock in section 115JAA(3A) continues to run for credit already earned, and section 536(2)(l) of the 2025 Act is the bridge that carries it, but there is no clause of section 206(1) under which a company paying minimum tax for tax year 2026-27 earns a fresh credit at all. A single project company incorporated today therefore does not have a credit it may fail to use; it has no credit.

The section 115BAA trap: twenty-two per cent, or the deduction, not both

Section 115BAA allows a domestic company to compute its income-tax at twenty-two per cent “at the option of such person”, if the conditions in sub-section (2) are satisfied. Clause (i) of sub-section (2) requires the total income to be computed “without any deduction under the provisions of section 10AA or clause (iia) of sub-section (1) of section 32 or section 32AD or section 33AB or section 33ABA or sub-clause (ii) or sub-clause (iia) or sub-clause (iii) of sub-section (1) or sub-section (2AA) or sub-section (2AB) of section 35 or section 35AD or section 35CCC or section 35CCD or under any provisions of Chapter VI-A other than the provisions of section 80JJAA or section 80M”.

Section 80-IBA is in Chapter VI-A and is neither section 80JJAA nor section 80M. So a company that has exercised the option cannot claim the housing deduction. Three further features make this a trap rather than merely a choice.

The option is irrevocable, and there is an argument that it is not. Sub-section (5) requires the option to be exercised on or before the section 139(1) due date and provides that “such option once exercised shall apply to subsequent assessment years”, and the second proviso says that “once the option has been exercised for any previous year, it cannot be subsequently withdrawn for the same or any other previous year”. On the face of it, a group company that opted into section 115BAA in assessment year 2020-21 for reasons unconnected with real estate, and which later undertakes an affordable housing project, cannot claim the deduction and cannot get out.

But sub-section (1) has a proviso of its own which the question is usually argued without: “Provided that where the person fails to satisfy the conditions contained in sub-section (2) in any previous year, the option shall become invalid in respect of the assessment year relevant to that previous year and subsequent assessment years and other provisions of the Act shall apply, as if the option had not been exercised for the assessment year relevant to that previous year and subsequent assessment years.” Claiming a deduction under Chapter VI-A is a failure to satisfy the condition in clause (i) of sub-section (2). So the assessee’s argument is that an optant which claims section 80-IBA in a later year does not break the law; it invalidates its own option for that year and every year after it, and the other provisions of the Act then apply as if the option had never been exercised, which is to say at the ordinary corporate rate with minimum alternate tax and with the deduction. The proviso is the mechanism by which the Act contemplates an option coming to an end, and it is not expressed as a penalty.

The Revenue’s answer is that the two provisions address different things: the proviso to sub-section (1) is a consequence imposed on a defaulting optant and not an election offered to it, the bar in sub-section (2)(i) operates at the stage of computing total income so that the deduction is simply not available to be claimed, and the second proviso to sub-section (5) would be deprived of all content if an optant could escape by claiming a deduction it was told it could not claim. The Revenue is also likely to say that an invalid option leaves the earlier years undisturbed but exposes the company to the loss of the deduction in the transitional year, and that the brought forward minimum alternate tax credit destroyed on exercise by section 115JAA(8) does not revive, because nothing provides for its revival.

No authority either way could be located. The point matters because the amounts are large and the structuring alternative, putting the project in a different company, is usually available and always cheaper than litigating this. Where it is not available, the argument is worth making, and it should be made in the return rather than kept in reserve. The identical question arises under the new Act, where section 200(1) carries no such first proviso but section 200(2) does the same work, providing that where the person fails to satisfy the requirements in sub-section (1) in any tax year “the option shall become invalid in respect of the said tax year and subsequent years”.

Minimum tax does not apply, which sounds like a benefit and is the mechanism of the loss. Section 115JB(5A)(ii) provides that section 115JB does not apply to “a person who has exercised the option referred to under section 115BAA or section 115BAB”. So the optant pays twenty-two per cent on its full profit, plus the surcharge and cess that the relevant Finance Act prescribes, on income that includes the housing profit in full. A non-optant claiming the deduction pays fifteen per cent of book profit, with cess and any surcharge, and holds a credit. The non-optant is better off even if the credit is worthless.

Accumulated credit is destroyed on exercise. Section 115JAA(8) provides that “The provisions of this section shall not apply to a person who has exercised the option under section 115BAA.” The Board confirmed the consequence in Circular No. 29/2019, dated 2 October 2019, which deals with the option introduced by the Taxation Laws (Amendment) Ordinance, 2019. Paragraph 5.2 reads: “As regards allowability of brought forward MAT credit, it may be noted that as the provisions of section 115JB relating to MAT itself shall not be applicable to the domestic company which exercises option under section 115BAA, it is hereby clarified that the tax credit of MAT paid by the domestic company exercising option under section 115BAA of the Act shall not be available consequent to exercising of such option.” The Department’s copy of that circular is a scan and parts of the text are illegible in its optical character layer; the operative sentence above was checked against an independent reproduction and read identically in both.

Note that sub-section (8) names only section 115BAA. Section 115JB(5A)(ii) switches the charge off for an optant under section 115BAA or section 115BAB, but the credit section is disapplied only to a section 115BAA optant. The Board’s reasoning in Circular No. 29/2019, that the credit goes because the charge goes, applies with equal force to a section 115BAB optant, and the text does not say so. It is of no practical consequence to a developer, because section 115BAB is confined to new manufacturing.

Paragraph 5.2.1 of the same circular contains the Board’s own sequencing advice and it is worth quoting, because it is the only official statement of what a company holding credit should do: “Further, as there is no time line within which option under section 115BAA can be exercised, it may be noted that a domestic company having credit of MAT may, if it so desires, exercise the option after utilising the said credit against the regular tax payable under the taxation regime existing prior to promulgation of the Ordinance.”

For a developer group the practical consequences are three. Check, before a project is launched, whether any group company has already exercised the option, because the choice of vehicle is then made for you. Do not put an affordable project into an optant company. And where a company holds minimum alternate tax credit and the option looks attractive for other reasons, run the arithmetic on using the credit first, as the Board itself suggests.

The same architecture is carried into the Income-tax Act, 2025. Section 200(1) gives the twenty-two per cent rate “at the option of a person being a domestic company”, and clause (a)(ii) requires total income to be computed “without any deduction under— … (ii) Chapter VIII other than provisions of section 146 or 148”. Section 142, the housing deduction, is in Chapter VIII and is neither section 146 (the section 80JJAA counterpart, additional employee cost) nor section 148 (the section 80M counterpart, inter-corporate dividends). Section 200(5) makes the option sticky in the same words, and section 200(6) makes it irrevocable. And section 206(1)(q)(ii) provides that the minimum tax sub-section “shall not apply to a person … who has exercised the option under section 200(5) or section 201(2)”. The trade-off is identical.

Alternate minimum tax: the firm and the limited liability partnership, and why they are treated worse

A great many affordable housing projects are developed by firms and limited liability partnerships. Of the four section 80-IBA matters this article could trace to a decided order, two are limited liability partnerships, and the vehicle shows in the litigation as well as in the industry. For them the minimum tax provision is not section 115JB but section 115JC, and the differences are not cosmetic.

The charge. Section 115JC(1): “where the regular income-tax payable for a previous year by a person, other than a company, is less than the alternate minimum tax payable for such previous year, the adjusted total income shall be deemed to be the total income of that person for such previous year and he shall be liable to pay income-tax on such total income at the rate of eighteen and one-half per cent.” Section 115JF(b)(ii) confirms the general rate as “eighteen and one-half per cent”; clause (b)(i) gives nine per cent for a unit in an International Financial Services Centre deriving income solely in convertible foreign exchange, and clause (b)(ia) gives fifteen per cent for a co-operative society.

So the rate is eighteen and one-half per cent for a non-corporate developer against fifteen per cent for a corporate one. That alone is a reason for a developer choosing a vehicle today to think hard before using an LLP, and it is almost never mentioned in the comparisons of company against LLP that circulate in the real estate industry, which concentrate on dividend taxation and on the absence of dividend distribution tax.

The base. Section 115JC(2): “Adjusted total income referred to in sub-section (1) shall be the total income before giving effect to this Chapter as increased by— (i) deductions claimed, if any, under any section (other than section 80P) included in Chapter VI-A under the heading ‘C.—Deductions in respect of certain incomes’; (ii) deduction claimed, if any, under section 10AA; and (iii) deduction claimed, if any, under section 35AD as reduced by the amount of depreciation allowable in accordance with the provisions of section 32 as if no deduction under section 35AD was allowed in respect of the assets on which the deduction under that section is claimed.”

Note the difference in technique. Section 115JB catches the deduction by omission: book profit is an accounting figure and nothing takes a Chapter VI-A deduction out of it. Section 115JC catches it by express addition: the Part C deductions are added back by name of their heading, and section 80-IBA sits under that heading. There is nothing to argue about. A firm or LLP that claims section 80-IBA has the deduction added straight back into adjusted total income and pays eighteen and one-half per cent on it.

The base is also different in kind. Book profit under section 115JB is accounting profit with statutory adjustments; adjusted total income under section 115JC is taxable total income with the deductions added back. For a developer whose accounting profit and taxable profit diverge, which is most of them, the two charges can produce quite different numbers on the same project, and not always in the direction one would expect.

The threshold does not help. Section 115JEE(1) applies Chapter XII-BA to a person who has claimed any deduction under a Part C section other than section 80P, or under section 10AA, or under section 35AD. Sub-section (2) then excludes small assessees: “The provisions of this Chapter shall not apply to an individual or a Hindu undivided family or an association of persons or a body of individuals, whether incorporated or not, or an artificial juridical person referred to in sub-clause (vii) of clause (31) of section 2, if the adjusted total income of such person does not exceed twenty lakh rupees.”

Read the list. An individual, a Hindu undivided family, an association of persons, a body of individuals, an artificial juridical person. A firm is not in the list and a limited liability partnership is not in the list. So the twenty lakh rupee threshold does not apply to them at all, and a partnership firm with an adjusted total income of five lakh rupees from a small housing project is inside the charge where an individual with the same income is outside it. There is no escape through the concessional rate options either, because section 115JC(5) excludes only a person who has exercised the option under section 115BAC, 115BAD or 115BAE, and none of those is available to a firm or an LLP.

The credit. Section 115JD mirrors section 115JAA. The credit is the excess of alternate minimum tax over regular income-tax; no interest is payable; set-off is allowed in a year in which regular income-tax exceeds alternate minimum tax, to the extent of that excess; and sub-section (4) provides that the carry forward “shall not be allowed beyond the fifteenth assessment year immediately succeeding the assessment year for which tax credit becomes allowable under sub-section (1)”. The same single project problem arises in the same way: a firm constituted for one project generates credit and never uses it.

The report. Section 115JC(3) requires a report from an accountant before the specified date referred to in section 44AB, certifying that the adjusted total income and the alternate minimum tax have been computed in accordance with Chapter XII-BA. Rule 40BA prescribes Form No. 29C. One oddity worth knowing: Annexure A to Form 29C has rows for the Chapter VI-A deduction and the section 10AA deduction and computes adjusted total income as “(5+7+8)”, with no row for a section 35AD deduction although section 115JC(2)(iii) requires one to be added back. The form also still prints 18.5 per cent, as does Form No. 29B for section 115JB, which still prints 18.5 per cent notwithstanding the fifteen per cent substituted by the proviso to section 115JB(1) from assessment year 2020-21. Those are form drafting lags, not law, but they catch out a first-time filer.

The comparison, stated plainly. Stated in one sentence: the non-corporate developer pays a higher rate on a different base with no threshold, and from tax year 2026-27 it is the only one of the two whose minimum tax is still a prepayment rather than a final charge. For the same project and the same profit:

	Company	Firm or limited liability partnership
Minimum tax provision	s.115JB	ss.115JC to 115JF
Rate	15 per cent of book profit (18.5 per cent before AY 2020-21)	18.5 per cent of adjusted total income
How the deduction is caught	By omission: Explanation 1 has no Chapter VI-A reduction	Expressly: s.115JC(2)(i) adds back Part C deductions
Base	Accounting profit with statutory adjustments	Taxable total income with deductions added back
Threshold	None	None for a firm or LLP; Rs 20 lakh for an individual, HUF, AOP, BOI or artificial juridical person
Credit	s.115JAA, to the fifteenth assessment year	s.115JD, to the fifteenth assessment year
Report	Form 29B, rule 40B	Form 29C, rule 40BA
Effect of a concessional rate option	s.115BAA or s.115BAB switches the charge off and forfeits the deduction	No option available to a firm or LLP
Position for tax year 2026-27 onwards	s.206(1) of the 2025 Act, 14 per cent. The forward-looking credit clauses, s.206(1)(m) to (p), were omitted with effect from 1 April 2026, so on the face of the text the tax is final; see the next section, where the reading is set out and qualified	s.206(2) of the 2025 Act, 18.5 per cent. The credit clauses, s.206(2)(e) to (i), were not omitted and the fifteen year carry forward is retained

The last row is the one that changes the answer, and it is the subject of the next section.

What the Income-tax Act 2025 froze, and the minimum alternate tax credit it removed

The Income-tax Act, 2025 came into force on 1 April 2026 under section 1(3), and it abolishes the two term scheme of previous year and assessment year in favour of a single “tax year”, defined in section 3(1) as “the twelve months period of the financial year commencing on the 1st April”. Everything below refers to the Year 2026 edition of each section, that is, the Act as amended by Act No. 4 of 2026, which is the Finance Act, 2026.

The deduction is frozen, not re-enacted. Section 142 is set out earlier in this article. It does not reproduce one condition of section 80-IBA(2) and not one definition from section 80-IBA(6). It tests entitlement counterfactually, by asking whether the assessee “is eligible to claim a deduction … under the provisions of the said section, as if the said Act had not been repealed”, computes the quantum “as per the provisions of section 80-IBA”, and limits the run to the tax years section 80-IBA would have allowed. Section 141 does the same for section 80-IB. The practical consequence is that nothing in this article about the conditions, about the carpet area definition or about the case law has been superseded; it is all still the operative law for a claim made for tax year 2026-27, reached through a provision of a repealed Act.

The savings provisions matter more than usual. Section 536(2)(b) preserves “any right, privilege, obligation or liability acquired, accrued or incurred under the repealed Income-tax Act”, which with section 142 is the basis on which a developer already in its deduction run continues. Section 536(2)(h), as substituted by Act No. 4 of 2026, is the clawback, and the amended version is wider than the version as enacted:

“(h) where any sum has been allowed as a deduction or has not been included in the total income of any person, either on account of fulfilment of certain conditions or for any other reason, for any tax year beginning before the 1st April, 2026, and such sum was required to be included in the total income of any subsequent tax year including beginning on or after the 1st April, 2026 under the repealed Income-tax Act, if it had not been so repealed, on account of violation of such conditions or for any other reason, then such sum shall be— (i) deemed to be the income of such subsequent tax year; and (ii) included in the total income of the said person under the same head of income as it would have been included under the repealed Income-tax Act;”

Two changes from the version as enacted are worth noting because they both widen it. The trigger is no longer only a “violation of such conditions” but “violation of such conditions or for any other reason”, and the year of charge is no longer “the tax year in which the violation takes place” but “such subsequent tax year”. For an affordable housing developer this is the provision that operates the section 80-IBA(4) reversal where the five year period expires on or after 1 April 2026, which, given that the approval window closed on 31 March 2022, is the position for most projects still in the field. The reversal happens under the 2025 Act, in the tax year the period expires, under the head profits and gains of business or profession because that is the head section 80-IBA(4) names.

The minimum tax rate falls to fourteen per cent. Section 206 of the 2025 Act collapses the whole of minimum alternate tax and alternate minimum tax into one section: sub-section (1) is the corporate charge, sub-section (2) the non-corporate charge, sub-sections (3) and (4) transitional credit, and sub-section (5) the residual clause. Section 206(1)(b) defines minimum alternate tax as the tax computed on book profit “(i) in case of a company being a unit located in an International Financial Services Centre and deriving its income solely in convertible foreign exchange, at the rate of 9%; (ii) in case of any other company, at a rate of 14%.” As enacted the figure was 15%; the Department’s footnote on the Year 2026 edition records “Sub. for ‘15%’ by Act No. 4 of 2026, w.e.f. 1-4-2026.”

Book profit is computed the same way, and still gives no credit for the deduction. Section 206(1)(c) defines book profit as the accounting profit as increased by ten listed items and as reduced by six, and section 206(1)(d) adds further adjustments. The reductions in clause (c) are: amounts withdrawn from a reserve or provision in specified circumstances; income to which section 11 applies or regular income of a registered non-profit organisation; depreciation other than on revaluation; amounts withdrawn from revaluation reserve to the extent of revaluation depreciation; deferred tax credited; and brought forward loss or unabsorbed depreciation, whichever is less, per the books. There is no item for a Chapter VIII deduction, and no reference to section 142. So the position under the 1961 Act carries across without change: the housing deduction does not reduce book profit.

Alternate minimum tax is unchanged in substance and now catches the deduction by name of a different chapter. Section 206(2)(b)(i) defines adjusted total income as total income before giving effect to the charge, “as increased by deductions claimed, if any, under— (I) any section (other than section 149) included in Chapter VIII-C; (II) section 46” net of notional depreciation. Section 206(2)(b)(ii) keeps the rates at nine per cent for an International Financial Services Centre unit, fifteen per cent for a co-operative society and eighteen and one-half per cent in any other case. Section 206(2)(d)(iii) keeps the twenty lakh rupee threshold and keeps it confined to an individual, a Hindu undivided family, an association of persons, a body of individuals and an artificial juridical person, so a firm and a limited liability partnership remain outside the threshold.

Section 142 sits in Part C of Chapter VIII, headed “Deductions in respect of certain incomes”, which runs from section 138 to section 152. Section 149 is the section 80P counterpart, “Deduction in respect of income of co-operative societies”, and section 46 is the section 35AD counterpart. So section 142 is a section “included in Chapter VIII-C”, it is not section 149, and the housing deduction is added back for alternate minimum tax in exactly the way section 115JC(2)(i) added it back. The position for a non-corporate developer is unchanged.

And now the change that matters. The minimum alternate tax credit for a company has gone.

The credit provisions as enacted were clauses (m), (n), (o) and (p) of section 206(1), and they reproduced section 115JAA almost word for word, including the fifteenth tax year limit in clause (o)(ii). The Department’s footnote on the Year 2026 edition reads: “Clauses (m), (n), (o) and (p) omtt. by Act No. 4 of 2026, w.e.f. 1-4-2026”, the abbreviation being the Department’s own, and it sets out the omitted text. The omission takes effect from 1 April 2026, which is the day the Act itself came into force. The clauses were therefore in the Act as passed and out of it before the Act ever operated.

What survives is transitional only. Section 206(3) deals with credit already earned under the 1961 Act, and it opens with a gateway:

“(3)(a) The provisions of this sub-section shall be applicable only to an assessee, being a domestic company, that has exercised the option under section 200(5) or section 201(2) for a tax year, beginning on or after the 1st April, 2026.”

For an assessee inside that gateway, clause (b) allows the brought-forward section 115JAA credit as on 31 March 2026 to be set off, but with a cap that has no counterpart in the 1961 Act:

“(i) such credit brought forward shall be allowed to be set off in any tax year to the extent of 25% of the tax payable on the total income computed as per the other provisions of this Act for that tax year;”

with the balance carried forward under clause (b)(ii) and the fifteenth tax year outer limit in clause (b)(iii), measured from the tax year in which the credit first became allowable under section 115JAA of the 1961 Act. Clause (d) disapplies clauses (a) and (b) to a successor limited liability partnership on conversion of a private or unlisted public company, which is the section 115JAA(7) rule carried across.

Section 206(4) deals with a foreign company, in its own gateway: “The provisions of this sub-section shall be applicable only to an assessee, being a foreign company.” For a foreign company the set-off is uncapped and in the 1961 form.

And section 536(2)(l), as substituted by Act No. 4 of 2026, is the bridge: brought-forward section 115JAA or section 115JD credit “shall be deemed to be the amount eligible for credit under corresponding provisions or section 206(3) or (4) of this Act, as the case may be in the case of said assessee”, allowed “for the period for which it would have been allowed under the repealed Income-tax Act if the assessee otherwise continues to satisfy the conditions as specified in the corresponding provisions or section 206(3) or (4) of this Act”.

Three consequences follow and they should be taken one at a time, because the first is clear, the second is clear and startling, and the third is genuinely arguable.

First, alternate minimum tax credit for non-corporates survives untouched. Section 206(2)(e) to (i) reproduce section 115JD, including the fifteenth tax year carry forward in clause (g). Those clauses were not omitted. So from tax year 2026-27, a developer limited liability partnership paying alternate minimum tax at eighteen and one-half per cent continues to earn and carry a credit, while a developer company paying minimum tax at fourteen per cent does not. The entity comparison in the table above therefore inverts. The company’s rate is lower and its tax is final; the LLP’s rate is higher and its tax is a prepayment. Which is better depends entirely on whether the LLP will have later years in which regular tax exceeds alternate minimum tax, which for a single project vehicle it will not; but for a developer with a pipeline of projects, some eligible and some not, the LLP is now arguably the better vehicle for the first time.

Second, on the face of the text a company paying minimum tax for tax year 2026-27 or later earns no credit at all. There is no forward-looking credit clause in section 206(1), because clauses (m) to (p) were omitted, and sections 206(3) and (4) are expressly confined to credit “allowed to be carried forward … under the provisions of section 115JAA of the Income-tax Act, 1961 … as on 31st March, 2026”. So the fourteen per cent is a final tax. For an affordable housing developer company this is the single largest change the new Act makes: the hundred per cent deduction in section 142 is worth eighty-six per cent of the profit, permanently, where under the 1961 Act it was worth eighty-five per cent of the profit with a fifteen year recovery mechanism attached.

That reading rests on the text of section 206 and on the Department’s own footnote. Two honest qualifications attach to it. The two official Central Board of Direct Taxes documents most likely to address the transition, the “FAQs on Transition Provisions under Section 536” and the “FAQs on Interplay and Transition from the Income Tax Act, 1961 to the Income Tax Act, 2025”, are published on the Department’s site as PDFs which could not be retrieved for this article because the site disallows automated access to them. And the Department’s own concordance utility between the two Acts is rendered in a way that could not be read either. A practitioner relying on the proposition in this paragraph should read both FAQ documents and the Finance Act, 2026 memorandum before advising on it, and should treat this article as having stated what section 206 says rather than as having closed the policy question.

Two arguments run the other way and both should be made before the proposition is accepted.

The first is textual and it cuts against the assessee. Section 206(1)(i), which survives, is the counterpart of section 115JB(2D) and permits a recomputation of book profit where income of a past year is brought in by an advance pricing agreement or a secondary adjustment; as substituted by section 59(a)(ii) of the Finance Act, 2026 it is conditional on the assessee not having “utilised the credit of tax paid under section 115JAA of the Income-tax Act, 1961 (43 of 1961), in any subsequent tax year ending on or before the 31st March, 2026”. The drafter of the Year 2026 edition therefore wrote, into a clause that survives, a reference to minimum alternate tax credit that stops at 31 March 2026 and refers only to credit under the repealed Act. That is consistent with an intention to end the credit rather than with an accidental omission, and it is the best corroboration the reading in this section has.

The second runs for the assessee and is a constitutional argument rather than a construction. A minimum tax that is recoverable is a prepayment; the same tax without a credit is a charge on an income that the Act has exempted. A developer company will say that Parliament gave a hundred per cent deduction by section 142 and took fourteen per cent of the same profit back by section 206(1) with no mechanism of recovery, that the two provisions in combination destroy the incentive the first of them grants, and that an incentive available in form and not in substance is arbitrary. The answer to it is that section 115JB always operated in exactly that way for a company whose credit lapsed unused, that the Karnataka High Court rejected the same argument in Sankhla Polymers on the ground that reading a Chapter VI-A deduction into the minimum tax computation would itself be discriminatory, and that the rate at which Parliament taxes book profit and the existence of a credit against it are matters of legislative policy with which a court will not interfere. The assessee’s argument is weak and it is the only one available. It should be recorded in the return, not litigated first.

Third, there is a gap for a non-optant domestic company, and it is argued both ways. A domestic company that has not exercised the option under section 200(5) or section 201(2) remains liable to minimum tax under section 206(1), because section 206(1)(q)(ii) excludes only a person who has exercised one of those options. But it is not within section 206(3), whose gateway in clause (a) requires an option to have been exercised, and it is not within section 206(4), whose gateway requires a foreign company. On the face of section 206, such a company has no machinery at all for setting off the section 115JAA credit it holds as on 31 March 2026, even though it is the very class of company that has such credit, because a company that had opted into section 115BAA before 1 April 2026 had already lost its credit under section 115JAA(8).

The reading that saves it runs through section 536(2)(l). That clause deems the brought-forward credit to be “the amount eligible for credit under corresponding provisions or section 206(3) or (4) of this Act, as the case may be”, and the disjunctive is doing work: where section 206(3) and (4) do not apply, the “corresponding provisions” limb is the one that operates, and the credit is allowed “for the period for which it would have been allowed under the repealed Income-tax Act”. On that reading the credit survives for a non-optant domestic company and is set off in the manner section 115JAA would have allowed, which is better than the twenty-five per cent cap that an optant suffers. The difficulty with it is that the “corresponding provisions” for a company’s minimum alternate tax credit were clauses (m) to (p) of section 206(1), and they no longer exist, so the limb points at nothing.

There is a second route to the same result and it is the stronger of the two, because it does not depend on a limb that points at nothing. Section 536(2)(b) preserves “any right, privilege, obligation or liability acquired, accrued or incurred under the repealed Income-tax Act”. A company that paid minimum alternate tax for assessment year 2024-25 acquired, on payment and under section 115JAA(1A), a right to credit for it, exercisable in the fifteen years that followed. That is a right accrued under the repealed Act in the ordinary sense, and section 536(2)(b) saves it without any need for machinery in section 206, section 6 of the General Clauses Act, 1897 supplying the same answer if the Act had been silent; section 536(4) applies that section expressly. The Revenue’s reply is the maxim rather than the words: that where a repealing Act makes specific provision for a particular accrued right, as sections 206(3) and (4) and section 536(2)(l) do for minimum alternate tax credit, the specific provision measures the extent to which the right is saved and excludes the general clause, and that the twenty-five per cent annual cap in section 206(3)(b)(i) would be meaningless if a company could take the whole of its credit through section 536(2)(b) instead. The assessee’s answer to that is that sections 206(3) and (4) are confined by their own gateways to two classes of assessee, so they cannot be read as an exhaustive code for a class they do not mention.

The reading that denies it is that Parliament chose to confine transitional set-off to two classes, an optant domestic company and a foreign company, that section 536(2)(l) is a deeming provision and not a charging or allowing provision, and that a deeming provision cannot supply machinery that the operative section does not contain.

There is one further piece of text in the assessee’s favour on this narrower question, and it comes from the amending Act itself. The substituted sub-clause (ii) of section 206(1)(i), noticed above for a different purpose, conditions the recomputation relief on the assessee not having “utilised the credit of tax paid under section 115JAA of the Income-tax Act, 1961 (43 of 1961), in any subsequent tax year ending on or before the 31st March, 2026”. The same Act that omitted clauses (m) to (p) therefore wrote, into the sub-section it was amending, words that assume a company can utilise brought-forward section 115JAA credit in a tax year under the new Act. Those words point against a fresh credit and in favour of the survival of an old one, which is exactly the distinction this question turns on. They do not supply machinery, but they are a strong indication that Parliament did not intend the brought-forward credit of a non-optant company to disappear.

Neither reading is comfortable. The assessee’s reading produces a result in which a non-optant domestic company is better treated than an optant, which is the reverse of what one would expect from a provision that caps the optant at twenty-five per cent. The Revenue’s reading produces a result in which the class of companies holding the credit loses it by accident. The honest position is that section 206 as amended does not say what happens to a non-optant domestic company’s brought-forward credit, that section 536(2)(l) is the only provision that could, and that the point will have to be decided. A developer company in that position should quantify the credit, claim the set-off in its return under section 536(2)(b) and section 536(2)(l) read with section 206, say in the computation that no provision of section 206 applies to it on its own terms and on what basis the claim is therefore made, and expect the question to go to appeal. Claiming it and recording the reasoning is what preserves the point; a credit left out of the return is a credit abandoned, by the same reasoning that section 80A(5) applies to a deduction.

One further point for completeness. A domestic company considering the section 200 option from tax year 2026-27 now faces a sharper trade-off than it did under section 115BAA. It gives up the section 142 housing deduction, as before. It also moves out of minimum tax under section 206(1)(q)(ii), which is now more valuable, because minimum tax carries no credit. And it moves into section 206(3), which is now the only route to its brought-forward credit, but capped at twenty-five per cent of a year’s tax. So for a company holding a large credit and no eligible housing project, exercising the option may be the only way to use the credit at all, and the twenty-five per cent cap is the price. That is a strange incentive structure and it is what the text produces.

The seller’s side: section 43CA and the discount that becomes income

An affordable housing developer sells below the circle rate more often than any other kind of seller, because the units are priced to a budget and circle rates in peripheral localities are frequently stale or set for a different product. Section 43CA is the provision that turns that discount into income.

Sub-section (1) provides that where the consideration for the transfer of an asset other than a capital asset, being land or building or both, “is less than the value adopted or assessed or assessable by any authority of a State Government for the purpose of payment of stamp duty”, the stamp duty value “shall, for the purposes of computing profits and gains from transfer of such asset, be deemed to be the full value of the consideration”. The first proviso gives a tolerance: the sub-section does not apply where the stamp duty value “does not exceed one hundred and ten per cent of the consideration”.

The second proviso gave a wider tolerance for residential units and it has expired. It substituted “one hundred and twenty per cent” for “one hundred and ten per cent” where three conditions were satisfied: the transfer took place “during the period beginning from the 12th day of November, 2020 and ending on the 30th day of June, 2021”; it was “by way of first time allotment of the residential unit to any person”; and the consideration did not exceed two crore rupees. Section 56(2)(x) carried the mirror relief on the buyer’s side, its fourth proviso lifting “ten per cent” to “twenty per cent” for property within the second proviso to section 43CA(1). Both were time bound to 30 June 2021.

Sub-sections (3) and (4) are the agreement date rule: where the date of the agreement fixing the consideration and the date of registration differ, the stamp duty value on the date of the agreement may be taken, but only “where the amount of consideration or a part thereof has been received by way of an account payee cheque or an account payee bank draft or by use of electronic clearing system through a bank account or through such other electronic mode as may be prescribed on or before the date of agreement”. That condition is strict and it is the one developers fail: a booking taken in cash, or against a cheque banked after the agreement date, loses the agreement date and is tested against the circle rate at registration, which in a rising market is always worse.

Sub-section (2) applies sub-sections (2) and (3) of section 50C “so far as may be”, which brings in the valuation officer reference. That is the route where the circle rate is demonstrably above fair market value, and the discipline it imposes is the same one the Ahmedabad Bench applied, on measurement rather than on value, in Kavish Infrastructure: an addition made without the reference is vulnerable. A developer disputing a section 43CA addition should ask for the reference in writing, early, and record the refusal; see our page on section 142A for the parallel machinery.

Three interactions with section 80-IBA deserve separate statements.

The two provisions can fire together on the same unit. As set out earlier, a unit sold for Rs 41 lakh with a stamp duty value of Rs 47 lakh breaches the Rs 45 lakh condition in clause (g) of the substituted set and suffers a section 43CA addition of Rs 6 lakh. The same circle rate does both.

Does the deduction cover the section 43CA addition? This is open and genuinely arguable. Section 80-IBA(1) allows a deduction of the profits and gains “derived from such business”. A section 43CA addition is a notional increase in the full value of consideration for the purposes of computing the profits and gains from the transfer of the asset, and the asset is stock in trade of that very business. The assessee’s argument is that the addition is computed as part of the profits and gains of the eligible business, that it is not a separate head or a separate deeming of income under some other provision, and that it therefore falls squarely within “profits and gains derived from such business” and attracts the deduction; and that any other reading taxes a developer on a profit it did not make and denies it the relief Parliament gave on the profit it did. The Revenue’s argument is that “derived from” has been read restrictively in this very area, as Moon Star Developers shows at paragraph 33 where profit on unused floor space index was held not to be “derived from such housing project”, and that a statutory fiction which substitutes a value the developer never received cannot produce income derived from the business of developing and building. No authority either way could be located. The assessee’s argument is, in our view, the better one, because the fiction operates inside the computation of business profits rather than outside it; but it has not been tested.

And if the deduction does not cover it, the addition is taxable while the real profit is deducted. That is the worst case and it should be modelled. A developer with a real profit of Rs 10 crore fully deducted and section 43CA additions of Rs 1 crore would, on the Revenue’s reading, have a total income of Rs 1 crore, pay regular tax on it, and separately face the minimum tax computation on a book profit that does not include the Rs 1 crore at all, because the addition is a tax fiction and not an accounting entry.

In the Income-tax Act, 2025 the provision is section 53, and one change is substantive. Section 53(2) gives a flat tolerance of 110 per cent and there is no residential unit carve-out, no 120 per cent limb and no two crore ceiling anywhere in the section. The expired 1961 relief has not been carried forward in any form. Section 53(3) and (4) carry the agreement date rule, with the banking condition compressed to “received by specified banking or online mode”. The valuation machinery is in section 53(5), by reference to section 78(2) and (3), section 78 being the section 50C counterpart.

Unsold stock: section 23(5) and the two year window

A developer that does not sell out is taxed on what it has not sold. Section 23(5) provides that where property “consisting of any building or land appurtenant thereto is held as stock-in-trade and the property or any part of the property is not let during the whole or any part of the previous year, the annual value of such property or part of the property, for the period up to two years from the end of the financial year in which the certificate of completion of construction of the property is obtained from the competent authority, shall be taken to be nil.”

Three features matter. The clock runs from the end of the financial year in which the completion certificate is obtained, not from the date of the certificate, which gives a developer completing in April almost three years and a developer completing in March almost exactly two. The relief is a nil annual value for that period and nothing afterwards: from the third year the unsold flats carry a notional annual value computed under section 23(1)(a), the sum for which the property might reasonably be expected to let. And the completion certificate that starts the clock is the same document that section 80-IBA(2)(b) requires, so a developer that cannot get the certificate has a section 80-IBA problem and a section 23(5) problem at once, though in opposite directions: no certificate means no clawback trigger has yet been avoided but also means the two year window has not begun.

The interaction with section 80-IBA is clean and unhelpful. The notional annual value is income under the head income from house property, not under profits and gains of business or profession. Section 80-IBA(1) deducts from “profits and gains derived from such business”. So the deduction does not touch the notional rent, and a developer with substantial unsold stock three years after completion has taxable house property income (after the thirty per cent standard deduction in section 24(a)) even though its entire business profit is deducted. For a company that income is also outside book profit, because a notional annual value is a tax fiction and not an accounting entry, so it increases regular tax without increasing minimum tax. In the ordinary case regular tax on the notional rent will still be far below the minimum tax on book profit, so the minimum tax remains the operative charge and the notional rent produces no extra cash tax; but in the tail years of a project, when the business profit has been recognised and the book profit has fallen away, the notional rent can become the charge that bites.

In the 2025 Act the provision is section 21(5): “Where a property is held as stock-in-trade and is not let wholly or partly at any time during the tax year, the annual value of such property or part thereof shall be nil up to two years from the end of the financial year in which the certificate for completion of construction is obtained from the competent authority.” As enacted it read “nil for two years”; Act No. 4 of 2026 substituted “nil up to two years” with effect from 1 April 2026, restoring the 1961 formulation and removing any argument that the nil value was a fixed two year block rather than a maximum period. Note that section 21(5) measures the period from the end of the financial year even though the Act otherwise works in tax years, which is the 1961 wording carried across.

The buyer, the stamp duty value and the tax deducted at source

The scope of this article is the developer, but three buyer-side provisions change the economics of an affordable unit and a developer needs to know where they sit.

Section 194-IA requires a transferee to deduct one per cent of “such sum or the stamp duty value of such property, whichever is higher”, and sub-section (2) provides that no deduction is to be made “where the consideration for the transfer of an immovable property and the stamp duty value of such property, are both, less than fifty lakh rupees”. Both figures must be below fifty lakh for the exemption to apply, so a unit sold at Rs 44 lakh with a stamp duty value of Rs 51 lakh is within the charge. Since the section 80-IBA cap is Rs 45 lakh of stamp duty value, most qualifying units are outside section 194-IA, but the margin is only five lakh rupees and circle rates close it. Explanation (aa) defines consideration inclusively to take in club membership fee, car parking fee, electricity or water facility fee, maintenance fee, advance fee “or any other charges of similar nature, which are incidental to transfer of the immovable property”, and the proviso to sub-section (2), inserted with effect from 1 October 2024, aggregates the amounts paid by all transferees to all transferors where there is more than one of either. A developer’s price list that splits the consideration into a base price and a schedule of charges does not take the transaction below the threshold. In the 2025 Act the provision is in the tables in section 393(1), at serial number 3 of the table for payments to residents.

Section 80EEA gave an individual buyer a deduction of up to one lakh fifty thousand rupees of interest, over and above section 24(b), subject to three conditions: the loan sanctioned between 1 April 2019 and 31 March 2022; the stamp duty value of the residential house property not exceeding forty-five lakh rupees; and the assessee not owning any residential house property on the date of sanction. The Rs 45 lakh figure is the same figure as in clause (g) of the substituted set in section 80-IBA(2), and both were introduced in the same Finance (No. 2) Act, 2019 season, which is the clearest evidence that the stamp duty value cap was meant to align the developer’s incentive with the buyer’s. Both windows closed on 31 March 2022. The deduction continues for the life of a loan sanctioned inside the window, now under section 131 of the 2025 Act, which carries the provision across intact. Section 80EE, the earlier and smaller deduction of up to fifty thousand rupees for loans sanctioned between 1 April 2016 and 31 March 2017, is section 130.

Section 24(b) is unchanged in substance and is the provision that matters for every buyer. Interest on borrowed capital is deductible without limit for a let property; the first proviso caps the deduction at thirty thousand rupees for a self-occupied property referred to in section 23(2), and the second proviso raises it to two lakh rupees where the capital was borrowed on or after 1 April 1999 and the acquisition or construction is completed within five years from the end of the financial year in which the capital was borrowed, subject to the lender’s certificate required by the third proviso; the fourth proviso caps the aggregate of the first and second provisos at two lakh rupees. The Explanation gives pre-construction interest in five equal instalments. In the 2025 Act this is section 22, with the interest in sub-section (1)(b) and (c) and the caps in sub-sections (2) and (5). One drafting fix is worth recording: as enacted, section 22(2) capped only the deduction under “sub-section (1)(b)”, which left pre-construction interest under (1)(c) outside the two lakh rupee self-occupied cap; Act No. 4 of 2026 substituted “sub-section (1)(b) and (c)” with effect from 1 April 2026, closing the gap and restoring the 1961 position.

Twelve open questions on section 80-IBA, and how each is argued both ways

These are collected in one place because they are the questions on which an assessment will actually turn, and because on none of them could a decision be found that settles the point. Each is stated with the competing readings and with what, if anything, exists by way of authority.

1. Is a breach of a section 80-IBA condition fatal to the project or confined to the offending unit? Split between High Courts under section 80-IB(10)(c), and worse for the assessee under section 80-IBA because the conditions in sub-section (2) are drafted at project level. The project-level holding in Brahma Associates answer (d) carries a Supreme Court approval in Veena Developers which the pro rata line never addresses. The only decision applying pro rata under section 80-IBA is a Tribunal order, Sunteck Realty.

2. At what date is the stamp duty value of a unit tested under clause (g) of the substituted set? Approval, allotment or agreement, or registration. The statute fixes no date. Sections 43CA, 50C and 56(2)(x) each contain an express agreement-date rule and clause (g) does not, which is the Revenue’s point; the assessee’s point is that a condition which a developer must satisfy by pricing has to be tested when the price is fixed. No authority.

3. Against which permissible floor area ratio is clause (2)(h) tested? The ratio permissible at approval, at completion, or in each year. Local authorities have increased permissible ratios through premium floor space index and transferable development rights, so the answer can turn a compliant project into a non-compliant one without the developer doing anything. No authority, and no decision on clause (2)(h) at all.

4. What is “the plot of land” for clauses (2)(d) and (2)(e), and must it be contiguous? No decision located on contiguity. Nagjua Developers expressly does not decide it. The condition in clause (2)(e) that the project be the only housing project on the plot has no counterpart in section 80-IB(10) and reverses the result in Vandana Properties for a section 80-IBA project.

5. Does the deduction extend to an addition made under section 43CA? The addition is computed inside the profits and gains of the eligible business, which is the assessee’s argument; Moon Star Developers read “derived from” restrictively, which is the Revenue’s. No authority either way could be located. The same four words carry the whole of the quantum question, and, because section 80-IA(5) is not imported, they also leave open whether the eligible profit is the actual profit of the year or must be reduced by the eligible business’s own earlier losses notionally; no decision on that could be located either.

6. Does a section 80-IBA or section 80-IB(10) deduction reduce book profit under section 115JB? On the text, no, and nothing in Explanation 1 provides for it. No High Court or Supreme Court decision on either sub-section could be located. Sankhla Polymers, on section 80-IB generally, is against the assessee and its special leave petition was dismissed; Gee City Builders is a Tribunal order to the same effect on a housing project.

7. Does a company’s brought-forward minimum alternate tax credit survive into the 2025 Act where the company has not exercised an option under section 200(5) or section 201(2)? Section 206(3) and (4) do not reach it on their gateways, the forward-looking credit clauses were omitted, and section 536(2)(l) points to “corresponding provisions” that no longer exist. Argued both ways above. This is the most consequential open question on the subject today.

8. Does a company earn any minimum alternate tax credit at all for a tax year beginning on or after 1 April 2026? On the face of section 206 as amended, no. The two official transition FAQ documents could not be retrieved for this article and should be read before the proposition is acted on.

9. Does minimum alternate tax credit pass on an amalgamation? Section 115JAA says nothing, and sub-section (7) expressly destroys the credit on conversion into a limited liability partnership, which cuts both ways. No authority located on a housing company.

10. Is an architect’s completion certificate sufficient? Accepted by the Jodhpur Bench in Aasan Affordable Housing LLP on the strength of a State empanelment scheme. Under reference to a Larger Bench of the Bombay High Court by the order of 31 July 2026 in Atul Properties, which doubted Hindustan Samuh Awas. Not settled anywhere.

11. Must the completion certificate be issued within the period, or is a timely application enough? Gujarat in Tarnetar says an application suffices; Madhya Pradesh in Global Reality says the certificate must bear a date of issue inside the window and the requirement is not directory. The Supreme Court dismissed the appeals against Tarnetar for low tax effect “leaving the question of law open” on 6 September 2018, and stayed Global Reality on 8 July 2019. Both ways open, with no settled authority available to either side.

12. Does the allotment of multiple units to a landowner under a joint development agreement breach clause (2)(g)? On the words it does. No exception for consideration for land. No authority, and the structuring answer is to avoid the question.

On a live file: a section 80-IBA checklist from structuring to assessment

At the structuring stage, before the building plan is approved. Fix the vehicle with the minimum tax in view and not only the income-tax rate: a company pays fourteen per cent of book profit with no credit from tax year 2026-27, a firm or limited liability partnership pays eighteen and one-half per cent of adjusted total income and keeps the credit, and there is no threshold for a firm. Check whether any company in the group has exercised the option under section 115BAA or, now, section 200(5) or section 201(2), because an optant cannot claim the deduction and the option cannot be withdrawn. Model the minimum tax as a cost in the project cash flow rather than treating the deduction as worth a hundred per cent.

On the plot. Confirm the plot area against the land revenue record and against the approved plan, and confirm that the project will be the only housing project on it, because clause (2)(e) has no counterpart in the older section and reverses Vandana Properties. Where a larger holding is being carved up, settle at the outset what document will be relied on as establishing the plot.

On approval. The deemed approval date is the date the building plan was first approved, so a project with an earlier approval in its history may be outside the 1 June 2016 to 31 March 2022 window even though the approval being built on is inside it. Obtain the complete approval history before the claim is made, not when it is questioned.

On measurement. Measure carpet area to the Real Estate (Regulation and Development) Act definition and keep the architect’s working, not the brochure. External walls, service shafts, the exclusive balcony or verandah and the exclusive open terrace come out; internal partition walls stay in. Do not convert from built-up area by a ratio. Keep the three per cent commercial carpet area computation separately, because clause (2)(c) is not replaced by the 1 September 2019 proviso and three per cent is the figure for every project.

On floor area ratio. Record the permissible ratio as at the date of approval, in writing, from the authority. Record the basis on which the authority computes it. Where the ninety or eighty per cent cannot be met because of a height restriction, a heritage control line, a service corridor or overhead lines, put the restriction and its source document on the project file at the time, because that is the only material any court has treated as mattering.

On allotment. Take a declaration from every allottee that no other unit in the project stands allotted to the allottee, the spouse or the minor children, and keep the declarations with the agreements. In a joint development, pay the landowner in money, in commercial area within the three per cent, or in units in a different project, rather than in multiple residential units in the eligible project.

On pricing. Test every unit against the stamp duty value and not against the price. Where the stamp duty value approaches Rs 45 lakh for a project approved on or after 1 September 2019, get a valuation and consider a reference, because the condition is binary. Keep the agreement date rule in section 43CA(3) available by ensuring that part of the consideration is received through the banking channel on or before the date of the agreement, as section 43CA(4) requires.

On the completion certificate. Apply well before the five year date, in writing, with proof of filing, and follow up on the record. Ask expressly for a certificate of completion of the project as a whole. Where the authority issues building-wise occupation certificates only, record the refusal. Where the State permits an architect’s certificate, obtain it and obtain the architect’s empanelment or authorisation document with it, and note that the Bombay position on architect’s certificates is under reference to a Larger Bench.

On the books and the return. Maintain separate books of account for the project from the first day. Claim the deduction in the return, because section 80A(5) bars a claim not made in it, and file the return by the section 139(1) due date, because section 80AC bars the deduction for a late return and the Calcutta High Court has held the bar mandatory in Shelcon Properties, although the Jaipur Bench allowed a sixteen day delay on a section 80-IBA claim in Aravali Buildhomes LLP. If the date has been missed, apply under section 119(2)(b) at once, with a specific and documented explanation; the three High Court decisions in this field have all been on condonation and all have gone the assessee’s way, but none of them held the deduction allowable. File the accountant’s report on the minimum tax computation by the specified date: Form No. 29B under section 115JB(4) and rule 40B for a company, Form No. 29C under section 115JC(3) and rule 40BA for a firm or limited liability partnership, and, for a tax year beginning on or after 1 April 2026, Form No. 66 under rule 137 or Form No. 67 under rule 138 of the Income-tax Rules, 2026.

When the clawback looms. Section 80-IBA(4) reverses the entire deduction in the year the five year period expires, and for a period expiring on or after 1 April 2026 it does so through section 536(2)(h) of the 2025 Act, in that tax year, as business income. Quantify it before the year ends, provide for it, and consider whether anything can be completed and certified in time. The only verified High Court material in the direction of a partial allowance is Sadhana Builders, decided at the admission stage on facts where the assessee had restricted its own claim and the uncompleted buildings had been abandoned for reasons outside its control.

When the assessment comes. Ask the Assessing Officer to identify the condition said to be breached and the units said to breach it, in writing, before replying. Where measurement or stamp duty value is in issue, ask for a reference to the Departmental Valuation Officer and record a refusal. Take the pro rata argument in the alternative and never as the primary case, because a primary case that concedes a breach concedes the condition. And meet Brahma Associates answer (d) in opening rather than waiting to be shown it.

When a Departmental submission cites one of these four, check it. Global Reality has been stayed by the Supreme Court and should not be met as though it were good law. Tarnetar was not approved by the Supreme Court; the appeals against it were dismissed for low tax effect with the question of law expressly left open. Arihant Foundations & Housing decides nothing at all: the Revenue’s appeals, on the completion certificate questions, were dismissed as withdrawn for low tax effect under Circular No. 17/2019, with the six substantial questions left open and liberty to restore. And the sentence “The decision of Radhe Developers & Ors. is over-ruled by the decision of Moon Star Developers”, which is quoted against assessees on the ownership question, appears in Pratham Developers as part of the lower authority’s reasoning reproduced in the judgment and is not a holding of the Gujarat High Court; Radhe Developers was followed, not overruled, in Moon Star Developers itself, at paragraphs 3 and 4. All four are regularly cited as though the opposite were true.

Concordance: the 1961 provisions and their counterparts in the Income-tax Act, 2025

Every provision in this article, with the 2025 Act section it becomes. The 2025 Act references are to the Year 2026 edition, that is, the Act as amended by Act No. 4 of 2026, the Finance Act, 2026.

Income-tax Act, 1961	Income-tax Act, 2025	What changed
s.80-IBA, housing project deduction	s.142	Not re-enacted. Eligibility, quantum and number of years all imported from s.80-IBA by reference, “as if the said Act had not been repealed”. Sits in Chapter VIII Part C
s.80-IB, including sub-section (10)	s.141	Same technique, referring to s.80-IB as a whole; sub-section (10) is not separately named
s.80A(5) and s.80AC, claim in the return and due date	s.122(5), clauses (a) and (b)	Merged into one sub-section, confined to Part C. The s.10A, 10AA, 10B and 10BA extension and the s.80AC transitional clause for earlier years are gone. Return due date fixed by s.263(1)
s.115JB, minimum alternate tax	s.206(1)	Rate cut from 15 per cent to 14 per cent by Act No. 4 of 2026. Book profit computation in s.206(1)(c) and (d); still no reduction for a Chapter VIII deduction
s.115JB(7), IFSC unit rate	s.206(1)(b)(i)	9 per cent, unchanged
s.115JAA, minimum alternate tax credit	s.206(1)(m) to (p), omitted by Act No. 4 of 2026 w.e.f. 1 April 2026. Only transitional set-off survives, in s.206(3) for an optant domestic company and s.206(4) for a foreign company, with s.536(2)(l) as the bridge	On the face of the text, no forward-looking credit for a company. Brought-forward credit capped at 25 per cent of a year’s tax for an optant; no express machinery for a non-optant domestic company
s.115JC, alternate minimum tax	s.206(2)(a) and (b)(i), (ii)	Rates unchanged: 18.5 per cent generally, 15 per cent co-operative society, 9 per cent IFSC unit. Add-back is of deductions under any section other than s.149 in Chapter VIII-C, and s.46
s.115JD, alternate minimum tax credit	s.206(2)(e) to (i)	Not omitted. Fifteenth tax year carry forward retained
s.115JEE, threshold	s.206(2)(c) and (d)	Twenty lakh rupees, unchanged, and still confined to an individual, HUF, AOP, BOI and artificial juridical person, so no threshold for a firm or LLP
s.115JE	s.206(5)	Unchanged
s.115JF, definitions	s.206(2)(b)(iii) and (iv)	Unchanged
s.115BAA, 22 per cent option	s.200	Still an option, exercised under s.200(5) and irrevocable under s.200(6). Chapter VIII deductions barred by s.200(1)(a)(ii) except ss.146 and 148, so s.142 is unavailable to an optant
s.115BAB, new manufacturing	s.201	Carried across in table form; no reference to housing or construction
s.80JJAA and s.80M, the two preserved deductions	s.146 and s.148	Unchanged in substance
s.80P, excepted from the add-back	s.149	Unchanged in substance
s.35AD	s.46	Unchanged in substance
s.43CA, stock in trade below stamp value	s.53	Flat 110 per cent tolerance. No residential unit carve-out, no 120 per cent limb, no two crore ceiling. Agreement date rule in s.53(3) and (4), banking condition compressed to “specified banking or online mode”. Valuation machinery through s.78(2) and (3)
s.50C, capital asset below stamp value	s.78	110 per cent tolerance, valuation officer reference
s.50CA	s.79	Noted because 78 and 79 are easily transposed
s.56(2)(x), recipient’s side	Chapter on income from other sources	Mirror of the 43CA relief was time bound and has lapsed
s.23, annual value	s.21	s.23(5) becomes s.21(5): “nil up to two years” after Act No. 4 of 2026 substituted “up to” for “for”
s.24, deductions from house property	s.22	Interest in s.22(1)(b) and (c); caps in s.22(2) and (5). Act No. 4 of 2026 extended the s.22(2) cap from “(1)(b)” to “(1)(b) and (c)”, bringing pre-construction interest inside the Rs 2,00,000 cap
s.80EEA	s.131	Carried across intact: Rs 1,50,000, loan sanctioned 1 April 2019 to 31 March 2022, stamp duty value up to Rs 45 lakh, no other residential house owned
s.80EE	s.130	Carried across
s.45(5A), joint development	s.67(14), with “specified agreement” in s.67(15)(b)	Capital gains consolidated into s.67
s.194-IA, one per cent on transfer	s.393(1), Table for payments to residents, serial number 3	All tax deduction provisions consolidated into tables in s.393
s.115JB(4) report, Form 29B, rule 40B	s.206(1)(s); rule 137 of the Income-tax Rules, 2026, Form No. 66	Report from an accountant as defined in s.515(3)(b)
s.115JC(3) report, Form 29C, rule 40BA	s.206(2)(j); rule 138 of the Income-tax Rules, 2026, Form No. 67	Same
s.297, repeals and savings	s.536	s.536(2)(b) accrued rights; s.536(2)(h) the clawback, substituted and widened by Act No. 4 of 2026; s.536(2)(l) the credit bridge, also substituted
s.3 and s.2(9), previous year and assessment year	s.3, “tax year”	One term replaces two. Tax year 2026-27 is the year of earning

The Department publishes a utility comparing the provisions of the two Acts, and two sets of frequently asked questions on the transition and on section 536. None of the three could be read for this article: the utility is rendered in a way that automated retrieval does not reach, and the two FAQ documents are published as PDFs which the site disallows. Every mapping in the table above was therefore closed against the operative text of the 2025 Act section itself, read off the Department’s own page with the Act and Year fields checked, which is a better source than a concordance table but does not substitute for the Department’s own stated views on the transition.

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This article states the law as at 19 October 2026 and is written for general information. It is not advice on any particular file. Where a point could not be closed against a primary source, it is said on the page where it arises rather than asserted. Three sources could not be read at all and the article is written without them: the Department’s own utility comparing the provisions of the 1961 and 2025 Acts, which is rendered in a way automated retrieval does not reach, and its two sets of frequently asked questions on the transition and on section 536, which are published as PDFs the site disallows. The reading of section 206 in this article therefore rests on the text of that section and on the Department’s own amendment footnotes, and a practitioner should read all three before advising. The Supreme Court orders relied on were read from the Court’s daily orders as reproduced on a public judgment database, the Court’s own reports and case status searches not being reachable, so the stay of Global Reality is closed against the order text and not against a certified case status and the position after 14 May 2025 could not be established. No edition of section 115JAA of the 1961 Act later than the Department’s 2025 edition was found, so whether the Finance Act, 2026 touched that section is not established. Everything else that could not be closed is identified in place.

This note is general commentary on the law as at 19 October 2026 and is not advice on any matter. The position in a particular case depends on its own facts.