Chapter VIII - Deductions to be Made in Computing Total Income
Section 142
Section 142: deduction for profits from housing projects
Section 142 continues the deduction available to developers of housing projects and rental housing projects that was previously given under section 80-IBA of the repealed Income-tax Act, 1961. As with the other carry-forward sections in this Chapter, the amount and the years for which it can be claimed are both fixed by reference to the old section, not recalculated afresh.
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Need advice on Section 142?
This article is for general information. Refer to the Income-tax Act, 2025 as amended by the Finance Act, 2026 and the Taxation and Other Laws (Amendment) Act, 2026 for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
In respect of any tax year, where—
(a) the gross total income of an assessee, includes any profits and gains derived from the business of developing and building housing projects or rental housing projects referred to in section 80-IBA of the Income-tax Act, 1961 (43 of 1961); and
(b) such assessee is eligible to claim a deduction from the profits and gains derived from such business for such tax year under the provisions of the said section, as if the said Act had not been repealed,
there shall be allowed, in computing the total income of the assessee, a deduction from the profits and gains derived from such business, subject to the conditions that—
(i) the amount of deduction is calculated as per the provisions of section 80-IBA of the Income-tax Act, 1961 (43 of 1961); and
(ii) the deduction under this Act shall be allowed only for such tax years, as would have been allowed under section 80-IBA of the Income-tax Act, 1961 (43 of 1961), as if the said Act had not been repealed.
Introduction
Section 142 continues housing-project deduction entitlement linked to Section 80-IBA of the 1961 Act. The project must satisfy the incorporated old-law conditions and remain within its permitted claim period.
Key takeaways
Continuing housing-project eligibility
A housing or rental-housing project already eligible under Section 80-IBA of the 1961 Act may claim its qualifying profits under the 2025 Act.
Old-law limits remain
The amount and remaining eligible tax years are worked out under Section 80-IBA as if the 1961 Act had not been repealed.
What Section 142 does
Where the gross total income of an assessee includes profits and gains derived from the business of developing and building housing projects or rental housing projects referred to in section 80-IBA of the Income-tax Act, 1961, and the assessee is eligible to claim a deduction from those profits and gains under that section (as if the said Act had not been repealed), a deduction from those profits and gains is allowed in computing total income under the 2025 Act.
How the deduction is worked out
- The amount of deduction is calculated as per the provisions of section 80-IBA of the Income-tax Act, 1961.
- The deduction under the 2025 Act is allowed only for the tax years for which it would have been allowed under section 80-IBA of the Income-tax Act, 1961, as if that Act had not been repealed.
Project-level evidence
Eligibility is assessed for the qualifying housing project, so preserve approvals, completion evidence, unit characteristics and project-level profits used for the historic claim.
Step-by-step flow for applying Section 142
- 1
Does gross total income for the tax year include profits and gains derived from the business of developing and building housing projects or rental housing projects referred to in section 80-IBA of the Income-tax Act, 1961?
Section 142(a) looks only at profits and gains from the kind of business referred to in section 80-IBA of the Income-tax Act, 1961.
- No: Section 142 does not apply.
- Yes: Go to the next step.
- 2
Would the assessee be eligible for the section 80-IBA deduction for this tax year, as if the 1961 Act had not been repealed?
Section 142(b) imports the old eligibility test. Section 142 itself sets no fresh conditions, so the historic approvals, commencement facts and claim history must support eligibility.
- Not eligible under the old section: No deduction under this section.
- Eligible: Go to the next step.
- 3
Is this tax year one for which section 80-IBA would still have allowed the deduction?
Condition (ii): the deduction is allowed only for the tax years that would have been allowed under section 80-IBA. Count the years already claimed; the 2025 Act does not restart or extend the period.
- Period already exhausted: No deduction for this or later tax years.
- Year still within the period: Go to the next step.
- 4
Compute the amount as per section 80-IBA and claim it
Condition (i): the amount is calculated as per the provisions of section 80-IBA of the 1961 Act, and is deducted from the profits and gains of that business in computing total income.
Practical checklist
Do
- Identify the relevant project and test old Section 80-IBA approval and completion conditions.
- Reconcile project profit and any previous deduction years before claiming.
Avoid
- Do not treat a new housing project as eligible merely because it is affordable housing.
- Do not restart old-law eligibility limits under Section 142.
Illustrative example
Worked example: a developer with an old-law housing project and a new project
Hypothetical facts (illustration only, not a real taxpayer): A developer has two projects: Project A, for which it was eligible for the section 80-IBA deduction under the 1961 Act, and Project B, launched recently. Profits of Project A are recognised in the current tax year.
Project A profits
Profits derived from developing and building Project A, a housing project referred to in section 80-IBA, fall within clause (a).
Old-law eligibility
The developer checks Project A's approvals, completion evidence and unit details against section 80-IBA as if the 1961 Act had not been repealed (clause (b)), and confirms the year is one that section would have allowed (condition (ii)).
Project B
Project B's profits are not covered unless Project B itself would have been eligible under section 80-IBA; Section 142 does not open eligibility for new projects on its own.
Outcome
- The deduction is computed as per section 80-IBA (condition (i)) on Project A's profits only.
- Project B's profits remain in total income unless its own old-law eligibility can be shown.
Glossary
- Housing project
- The qualifying project whose profits are tested under the incorporated old-law provision.
- Project-level profit
- Profit attributable to the eligible housing project rather than the developer's entire business.
Frequently asked questions
Does Section 142 create a fresh deduction for housing project developers?
No. It only continues the deduction available under section 80-IBA of the Income-tax Act, 1961, for developing and building housing projects or rental housing projects, for whatever remains of the original eligibility period, calculated the same way that section prescribed.
Does it also cover rental housing projects?
Yes - the section text refers to "housing projects or rental housing projects" as covered under section 80-IBA of the Income-tax Act, 1961.
Need help applying this provision to your situation?
Talk to our tax team about housing project deductionsLast updated 9 October 2026