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TMI BlogTransitional Tax Incentives for Affordable Housing : Clause 142 of Income Tax Bill, 2025 Vs. Section 80IBA of Income-tax Act, 1961X X X X Extracts X X X X X X X X Extracts X X X X ..... BA of the Income-tax Act, 1961. The legislative intent behind Clause 142 is to ensure continuity of tax benefits for eligible housing projects that were entitled to such deductions under the previous regime, thus avoiding abrupt disruption to ongoing projects and the broader real estate sector. Section 80IBA, introduced by the Finance Act, 2016 and subsequently amended, was a pivotal provision in the Income-tax Act, 1961, designed to incentivize the development of affordable housing and, later, rental housing projects. It provided for a 100% deduction of profits and gains derived from eligible housing projects, subject to a series of stringent conditions relating to project approval, completion, size, utilization of floor area ratio, and ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disadvantage eligible assessees. * It provides legal certainty and predictability for developers, investors, and other stakeholders in the real estate sector, thereby supporting the broader policy objective of promoting affordable and rental housing. Detailed Analysis of Clause 142 Clause 142 is structured as a transitional provision, and its operative mechanism is as follows: * Eligibility: * Applies to any assessee whose gross total income for a tax year includes profits and gains derived from the business of developing and building housing or rental housing projects referred to in Section 80IBA of the Income-tax Act, 1961. * The assessee must be eligible to claim a deduction u/s 80IBA, had the Act not been repealed. * Quantum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed may give rise to disputes, especially in cases where project timelines, approvals, or other factors are in question. Key Features and Conditions (by reference to Section 80IBA) Since Clause 142 adopts the provisions of Section 80IBA, the following key features are incorporated: * 100% Deduction: The entire profits and gains derived from eligible housing or rental housing projects are deductible. * Project Approval and Completion: The project must be approved by the competent authority within the specified dates and completed within five years of approval. * Size and Area Restrictions: Stringent limits on plot size, carpet area of residential units, and commercial area within the project. * Utilization of Floor Area Ratio (FAR): ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to avoid retrospective taxation of deductions already claimed. 3. Regulatory and Administrative Considerations Tax authorities will need to apply the old Section 80-IBA standards in respect of claims under Clause 142, even after the repeal of the Income-tax Act, 1961. This may require continued reference to repealed law and associated jurisprudence, potentially complicating administration and dispute resolution. Comparative Analysis: Clause 142 vs. Section 80IBA 1. Structural Approach * Section 80IBA: Operated as a substantive provision, directly conferring the deduction subject to compliance with detailed conditions. * Clause 142: Functions as a transitional or savings provision, referencing Section 80IBA for its operative content, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for "carpet area," "competent authority," "floor area ratio," "housing project," "rental housing project," "residential unit," and "stamp duty value." * Clause 142: Relies on all such definitions as incorporated from Section 80IBA, maintaining interpretative continuity. 7. Clawback and Anti-abuse Provisions * Section 80IBA: Contains a clawback mechanism: if the project is not completed within the specified period, deductions allowed are taxed as business income in the year of default. * Clause 142: By incorporating Section 80IBA, the clawback and anti-abuse provisions remain fully applicable to transitional cases. 8. Exclusion of Works Contracts * Section 80IBA: Explicitly excludes assessees executing projects as works contracts. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the interests of assessees with ongoing housing and rental housing projects that were eligible for deduction under Section 80IBA of the Income-tax Act, 1961, 1961. By incorporating the operative content of Section 80IBA by reference, Clause 142 ensures legal continuity, protects vested rights, and upholds the policy objectives underlying the original provision. However, the reliance on a repealed law for the operative mechanism introduces interpretative and administrative challenges, particularly regarding eligibility, compliance, and procedural aspects. Tax authorities may need to issue clarificatory guidance to ensure smooth implementation and prevent disputes. The comparative analysis reveals that Clause 142 is not a substantive r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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