new delhi may 11 the revenue department today came out with a draft note for computation of income for the real estate sector under which transactions with regard to sale and purchase of units will be recognised at arms length price the proposed income computation and disclosure standards icds for real estate transactions which follows the guidance note of institute of chartered accountants of india icai is aimed at providing uniformity certainty and harmonising the norms with the provision of the income tax act the draft follows implementation of the real estate regulation and development act 2016 rera as per the draft the revenue and cost will be recognised with reference to the stage of completion of the project which too has been defined the norms will apply for determination of income from all form of transactions in the real estate with respect to land buildings and rights therein the icds deals with sale of plots of land with or without development of common facilities development and sale of residential and commercial units transfer of development rights and redevelopment of existing buildings and structures the central board of direct taxes cbdt has invited comments from stakeholders on the draft till may 26 the draft defines fair values as the amount for which an asset could be exchanged between a knowledgeable willing buyer and a knowledgeable willing seller in an arms length transaction most of the deviations from the icais guidance note will have the effect of accelerating revenue recognition for tax purposes specifically the change requiring recording transferable development rights tdrs at fair value will create tax incidence on unrealised revenues said abhishek goenka partner pwc while the guidance suggested that tdrs should be recorded at fair market value or net book value the icds proposes that they should be calculated at the fair value of the development rights acquired goenka also said that with the advent of rera removal of the critical approvals test for revenue recognition is a logical step commenting on the draft jllr chairman anuj puri said the government has already made its intention to make all real estate related transactions clear with the benami property act and rera via these and various related measures the message being sent out is that transactions related to property and any income arising from such transactions will no longer be hidden and must be reported and declared he said rakesh bhargava director taxmanncom said the proposed icds shall be applicable for determination of income from all forms of transactions in real estate which refers to land as well as buildings and rights in relation thereto the companies will have to disclose the aggregate amount of cost incurred profits recognised advances received and work in progress along with inventories the draft said nkd mjh cs bal