Real Estate Developers - House property held as stock in trade – No Notional income (Section 23(5)) –Budget 2017

Section 23 of the Act provides for the manner of determination of annual value of house property.

Considering the business exigencies in case of real estate developers , it is proposed to amend the said section so as to provide that where the house property consisting of any building and 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 upto one year 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.

New subsection (5) under section 23 is proposed to be inserted.

The amendment will be effective from the previous year 2017-18 and subsequent years.

Real estate Sector (Promote affordable Housing), Rationalisation of provisions in respect of deductions of profits and gains from housing projects (Section 80-IBA) –Budget 2017.

Budget 2017, proposed to amend section 80-IBA so as to provide the following relaxation:-

Ø The size of residential unit shall be measured by taking into account the "carpet area" as defined in Real Estate (Regulation and Development) Act, 2016 and not the "built-up area".

Ø The restriction of 30 square meters on the size of residential units shall not apply to the place located within a distance of 25 kms from the municipal limits of the Chennai, Delhi, Kolkata or Mumbai.

Ø The condition of period of completion of project for claiming deduction under this section shall be increased from existing three years to five years.

The above amendment will apply for the previous year 2017-18 and subsequent years.

The existing provisions of section 80-IBA provides for 100% deduction in respect of the profits and gains derived from developing and building certain housing projects subject to specified conditions include :

Ø The limit of 30 square meters for the built-up area of residential unit in respect of project located in the Chennai, Delhi, Kolkata and Mumbai or within 25 kms from the municipal limits of these four cities.

Ø In order to be eligible to claim deductions, the project shall be completed within a period of three years.