After the Real Estate (Regulation and Development) Act, 2016, (RERA), came into effect, the Central Board of Direct Taxes (CBDT) has released the draft Income Computation and Disclosure Standard (ICDS) on real estate transactions for public consultation, requesting stakeholders to submit their comments on draft by 26th May, 2017.
The proposed ICDS which is based on the guidance note issued by Institute of Chartered Acountants of India (ICAI) will be applicable from assessment year 2017-18 for specified assessees to compute income under the head ‘profits and gains of business or profession’ or ‘income from other sources’ and is also aimed at providing uniformity, certainty and harmonising the same norms with the provision of the Income Tax Act.
According to the draft, transactions will include sale of plots of land with or without development of common facilities, development & sale of residential and commercial units, transfer of development rights, re-development of existing buildings & structures and joint development agreements for any of the mentioned activities.
The ICDS will be applicable for determination of income from all forms of transactions in real estate, including land and buildings. It also proposes recognition of transferable development rights (TDR) at the fair value against fair market value or net book value. 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.