s.80-IBA — Deduction for an affordable housing project
A hundred per cent deduction on the profits of a housing project approved between June 2016 and March 2022, on nine conditions, with a complete reversal if the project is not finished in five years.
Closed to new projects. Clause (2)(a) requires approval by the competent authority after 1 June 2016 and on or before 31 March 2022, and no amending provision later than section 29 of the Finance Act 2021 could be found on the Department's own site; the edition the Department labels 2026 still carries 31 March 2022. The section is nonetheless live for years to come, because clause (2)(b) gives five years to complete, so a project approved on the last day of the window has until 31 March 2027, and the clawback in sub-section (4) operates in the year the period expires. For a tax year beginning on or after 1 April 2026 the claim is made under section 142 of the Income-tax Act, 2025, which does not re-enact a single condition but imports the whole of section 80-IBA by reference, as if the 1961 Act had not been repealed.
Income-tax Act, 1961
s.80-IBA
Income-tax Act, 2025
s.142
In force from 1 April 2026, but s.536(2)(c) preserves the 1961 Act for tax years beginning before that date.
In short
Section 80-IBA of the Income-tax Act, 1961 allows a deduction of a hundred per cent of the profits and gains derived from the business of developing and building housing projects, where the project fulfils the nine conditions in sub-section (2). Those conditions are the approval window, completion within five years, a three per cent cap on commercial carpet area, a minimum plot size, the requirement that the project be the only housing project on the plot, a maximum unit carpet area, one unit per family, a minimum utilisation of the permissible floor area ratio, and separate books of account. For a project approved on or after 1 September 2019 a proviso substitutes clauses (d) to (i) with a set running (d) to (j): the geography widens from four cities to eight metropolitan areas, the unit carpet area rises from thirty to sixty square metres in those areas and from sixty to ninety elsewhere, and a new condition caps the stamp duty value of a unit at forty-five lakh rupees. Carpet area is not defined in the Act: clause (6)(a) adopts the definition in clause (k) of section 2 of the Real Estate (Regulation and Development) Act, 2016. Sub-section (3) denies the deduction to an assessee executing the project as a works contract. Sub-section (4) reverses the whole deduction as business income of the year the five year period expires if the project is not completed. The deduction does not reduce book profit, so a company claiming it pays minimum alternate tax under section 115JB, and a firm or limited liability partnership pays alternate minimum tax under section 115JC, which adds the deduction back expressly. The counterpart in the Income-tax Act, 2025 is section 142.
What the provision does
Grants the deduction, fixes the nine conditions a project must satisfy, defines the terms the conditions turn on, bars a works contractor, and provides for a complete reversal if the project is not completed in time. It imports nothing from section 80-IA, so unlike a section 80-IB claim it carries no audit report requirement, no inter-unit transfer provision, no ceiling at the profits of the eligible business and no excessive profits provision.
Threshold questions
- On which side of 1 September 2019 was the project approved, because the plot size geography, the unit carpet area and the existence of a Rs 45 lakh stamp duty value cap all turn on it
- Was the first approval of the building plan after 1 June 2016 and on or before 31 March 2022, the proviso to clause (2)(b) relating repeated approvals back to the first
- Is there a certificate of completion of the project as a whole, in writing, from the authority empowered to approve the building plan, dated within five years of that first approval
- Is the project the only housing project on the plot, which has no counterpart in section 80-IB(10) and reverses the result in Vandana Properties
- Does the project utilise at least ninety or eighty per cent of the permissible floor area ratio, and against which permissible ratio is that measured
- Were separate books of account maintained for the project from the first day, and was the deduction claimed in a return filed by the section 139(1) due date
In practice
The recurring disputes.
Whether a breach costs the project or only the unit
This is the central question and it is not settled. Madras, Karnataka and Bombay have allowed a proportionate deduction on the compliant units under section 80-IB(10)(c), most recently in the Bombay High Court's order of 17 July 2026 in Gera Realty Estates, following Kumar Builders Consortium. Against that stands answer (d) in Brahma Associates, that the deduction is on the profits of the project as a whole and the Tribunal was not justified in restricting it to part of the project, which the Supreme Court approved as part of a set in Veena Developers. The position is worse for the assessee under section 80-IBA, because sub-section (2) opens with the words that a housing project shall be a project which fulfils the conditions, and almost every clause takes the project as its subject rather than the unit. The only decision applying pro rata under section 80-IBA is a Tribunal order, Sunteck Realty, which rests on Bombay authority on differently worded words. The assessee's best unused argument is sub-section (4): where Parliament wanted a total reversal it provided for one, expressly and for one default only.
The date at which stamp duty value is tested
Clause (g) of the substituted set caps the stamp duty value of a residential unit at forty-five lakh rupees and fixes no date for the test. Circle rates rise, often annually, so a unit whose stamp duty value was inside the cap at allotment may be outside it at registration. The candidates are the approval of the project, the allotment or agreement, the transfer or registration, and the completion certificate. The assessee's argument for the agreement date is that the developer prices against the rate then prevailing and that the Act adopts the agreement date for exactly this purpose in sections 43CA, 50C and 56(2)(x). The Revenue's answer is that clause (g) contains no agreement date rule of its own, that where Parliament wanted one it wrote one, and that the definition in clause (6)(f) speaks of a value adopted or assessed for the purpose of payment of stamp duty, which are words about an instrument presented for stamping. No authority either way could be located.
Who may issue the completion certificate
The proviso to clause (2)(b) requires a certificate of completion of the project as a whole from the competent authority, and clause (6)(b) defines that as the authority empowered to approve the building plan. The Jodhpur Bench accepted a certificate from an architect empanelled by the State Government in Aasan Affordable Housing LLP, in the absence of material to the contrary. But on 31 July 2026, in Atul Properties, a Bombay Division Bench disagreed with the co-ordinate Bench decision in Hindustan Samuh Awas and referred to a Larger Bench the question whether an architect's certificate can substitute for the local authority's approval. Until that reference is decided, compliance resting on an architect's certificate rests on a position under reference. The wider question whether a timely application suffices, where the authority issues the certificate late, is split: Gujarat in Tarnetar says it does, Madhya Pradesh in Global Reality says the certificate must bear a date of issue inside the window, and the Supreme Court has declined to settle it, dismissing the appeals against Tarnetar for low tax effect with the question of law left open and staying Global Reality.
Whether a phase or a tower is a separate project
The proviso to clause (2)(b) relates repeated approvals of one project back to the first approval of the building plan, so the question is always whether there is one project or several, which is a question of fact with no agreed test. Gujarat applied a multi-factor test in Nagjua Developers, separateness by time, space, statutory approvals, design and books. Karnataka went further in Brigade Enterprises, holding that an individual residential block is to be considered a separate project. Madras treated six separately permitted blocks as one project in Voora Property Developers, which is the reverse of the same Court's approach in Visvas Promoters. Under section 80-IBA the incentives reverse, because if each tower is a separate project then each fails clause (2)(e), and if the towers are one project the clock runs from the first approval and the completion certificate must cover the whole. The Revenue can be expected to argue whichever answer defeats the claim.
The quantum, and what is derived from the business
Sub-section (1) allows the deduction on the profits and gains derived from such business, and because section 80-IBA imports nothing from section 80-IA those four words are the whole of the Revenue's machinery. The receipts that attract the argument are interest on advances from allottees, forfeited booking amounts, transfer charges on a resale before possession, club, parking and maintenance collections, compensation from a contractor or insurer, and the sale of unutilised floor space, on which the Gujarat High Court held against the assessee in Moon Star Developers. The allocation of overhead between an eligible and an ineligible project is the other half of the quantum, and the separate books condition puts it on the face of the record. There is no provision allowing the officer to recompute the eligible profit as the amount reasonably deemed to have been derived, because section 80-IA(10) is not imported. No decision on any of this under section 80-IBA could be located.