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I-T dept closes in on realty misuse
July, 04th 2006
The income tax department has unearthed large scale misuse of the deduction on profits available under Section 80IB of the Income Tax Act by developers and builders of housing projects.

The booming real estate sector seems to have spurred on the misuse of a deduction that was originally given to encourage construction of houses for the low and middle income groups.

Sources said the misuse had mostly occurred among smaller builders and was rampant in cities like Bangalore and Mumbai. IT authorities have uncovered over Rs 200 crore worth of undisclosed income after conducting 60 surveys across the country in the last financial year.

The deduction is contingent to the fulfillment of certain conditions including a cap on the size of the residential unit. Under the section, a residential unit cannot have a built-up area of more that 1,000 sq ft in cities like Delhi and Mumbai and 1,500 sq ft at other locations.

Also, the built-up area of shops and other commercial establishments included in the housing project cannot exceed five per cent of the aggregate built-up area of the housing project or 2,000 sq ft, whichever is less.

Sources added that in several cases, the misuse of the provisions was on account of the builders showing or declaring one flat as two separate flats in order to maintain the flat size restriction. In other cases, the commercial area was found to have exceeded the five per cent built-up area.

The misuse has assumed serious proportions and is likely to be discussed at the annual meeting of the chief commissioners of income tax on Tuesday.
 
 
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