Develop slums & enjoy tax benefits, CBDT tells builders in Mumbai

MUMBAI: By virtue of the Central Board of Direct Taxes (CBDT) notification, real estate firms who have ventured into Slum Rehabilitation Scheme (SRS) projects in Mumbai will be exempted from income tax. The declaration seems to have brought a smile to the faces of builders such as the Lokhandwala group, Ackruti , HDIL and Everest , who are estimated to have earned around Rs 4,000 crore from the sale of over 400 properties under the SRS & can now claim tax benefits on their profits.
The CBDT, which is the authority that supervises direct tax, issued a notification in the first week of August granting exemption under the scheme. This comes as a big relief to the builders who developed properties under SRS but were unable to claim tax benefits in the absence of a notification from the CBDT granting privileges under the scheme.
Under section 80-IB of the Income-Tax Act, income from a residential housing project in Mumbai and Delhi is fully tax exempt where the built up area is 1,000 sq ft or less and in other places where the built up area is 1,500 sq ft or less, subject to certain conditions. One of the conditions is that the project should be on a plot of one acre or more. However, a provision was introduced in the Income-Tax Act in 2004-05, relaxing the “one acre or more” condition to projects under SRS, provided the CBDT notifies the scheme.
From 2004-05, the year in which tax benefit was introduced for SRS, builders have constructed houses under the scheme in Mumbai and sought tax benefits. However, an unexpected problem cropped up when the I-T department denied them the tax benefits on the ground that CBDT had not issued a notification granting exemption on any such scheme, even though the tax benefit was introduced in the I-T Act six years ago. The CBDT, however in a notification dated August 3, 2010, recognised SRS in Mumbai (in the regulation 33(10) of DC regulation for Mumbai 1991) as a scheme eligible for exemption from taxes.
The Rs 32,000-crore slum redevelopment scheme was initiated in 1995 by the then Shiv Sena-BJP government, with the objective of providing at least eight lakh houses for the slum dwellers. About two lakh houses have been built under the scheme so far.