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The Central Board of Direct Taxes (CBDT) on Thursday released the draft Income Computation and Disclosure Standard (ICDS) on real estate transactions for public consultation.
By: FE Bureau | New Delhi | Published: May 12, 2017 7:17 AM
The Central Board of Direct Taxes (CBDT) on Thursday released the draft Income Computation and Disclosure Standard (ICDS) on real estate transactions for public consultation. The proposed ICDS will be applicable for determination of income from all forms of transactions in real estate, including land and buildings.
The draft ICDS doesn’t mandate obtaining all critical approvals for revenue recognition after the Real Estate (Regulation and Development) Act, 2016, (RERA), came into effect. It also proposes recognition of transferable development rights (TDR) at the fair value against fair market value or net book value as per the guidance note prepared by the Institute of Chartered Accountants of India (ICAI).
“The transactions will include sale of plots of land (including long-term sale type leases) with or without any developments, development and sale of residential and commercial units, row houses, independent houses, with or without an undivided share in land,” Rakesh Bhargava, director, Taxmann.com said. He added that acquisition, utilisation and transfer of development rights, redevelopment of existing buildings and structures and joint development agreements for any of the above activities will also be included.
Further, the proposed ICDS does away with the ceiling for revenue recognition based on stage of completion determined with reference to the project cost incurred. The draft is based on the guidance note issued on real estate transactions issued by ICAI with certain modifications as suggested by the government’s ICDS committee.
“The specific ICDS on real estate transactions shall be a welcome move as it will bring clarity and certainty in application of provisions of ICDS and computation of taxable income to the sector. It can be expected that in near future ICDS will be issued for other specific sectors where application of ICDS III & IV on income is unclear,” Vikas Gupta, partner, Nangia & Co, said.