'Affordable housing' may soon get a boost with the Income-Tax Department issuing guidelines for allowing investment-linked deductions to businesses in this space. The tax-breaks are likely to encourage real-estate developers show more interest in this segment where margins have been narrowing in recent years because of rising input costs.
Home loan companies had pitched for a time-bound, fast-track, single-window mechanism to clear affordable housing projects rather than tax sops. . The contours of the proposal were announced in the 2011-12 Budget. According to the proposal, project developers, under a scheme approved by the Centre or a State Government, will get 100 per cent deduction on any expenditure of capital nature (other than on land, goodwill and financial instruments) wholly for such projects.
The investment-linked deductions are to be made available from April 1, 2012 and will, accordingly, apply to assessment year 2012-13 and subsequent years, the Government had said.
The Central Board of Direct Taxes has now stipulated that the investment-linked deduction will be available only for projects that commenced operations on or after April 1, 2011. The projects will have to be completed in five years and come up on a minimum of 1 acre.
At least 30 per cent of the total allocable rentable area of the project should comprise affordable housing units for the economically weaker section (EWS) category. At least 60 per cent of such area should comprise affordable housing units for EWS and Lower Income Group (LIG) categories, the CBDT has said. At least 90 per cent should be made up of affordable housing units for the EWS, LIG and middle income groups (MIG). The remaining 10 per cent can house other residential or commercial units.
For the tax-break, the Income-Tax Department has linked the definition of affordable housing to the 'rentable area' and to the city where the project is located.