Declaration of Assets, liabilities in ITR Forms

The Income-tax department has taken a welcoming step by notifying the new ITR Forms for A.Y. 2016-17 in early April. And it seems that this year there are not many changes made. An important change made in ITR Forms is introduction of Schedule AL (Assets and Liabilities).

Schedule AL is not new since it was applicable to taxpayers having total income of more than Rs. 25 lakhs during a financial year in case of ITR 3 & 4. However after abolition of Wealth Tax, schedule AL is also added in other ITR Forms to protect the tax evasion by high-net worth individuals and entities.

When schedule AL is applicable?

Government made this schedule applicable to all taxpayers including salaried one. However the ceiling limit of total income has been increased from 25 lakhs to 50 lakhs.

Hence, taxpayer having a total income of more than Rs 50 lakh per annum will now have to disclose costly assets, investments in schedule AL.

What if total income of taxpayer is exactly Rs. 50 lakhs?

Total income is calculated by subtracting tax saving deductions from Gross Total Income of a taxpayer. In case, total income of taxpayer coming exactly Rs. 50 lakhs, then Schedule AL is not applicable.

E.g.- Suppose during F.Y. 2015-16, Gross Total Income of Mr. Aryan is Rs. 52,00,000/-. He paid life insurance premium of Rs. 1,50,000/- and contributed Rs. 50,000/- to National Pension Scheme. State whether Schedule AL is applicable to him or not.

Ans.- Total income of Mr. Aryan is coming Rs. 50,00,000/- (Rs. 52,00,000/- minus Rs. 2,00,000/-). As it does not exceed ceiling limit of Rs. 50 lakhs, Schedule AL is not applicable.

What details are required to be disclosed in schedule AL?

Persons who are required to fill this schedule will have to report the following details:

1. Immovable Property- Cost of Land and Building owned.
2. Movable Property- Cash in hand, cost of Jewellery, bullion, aircraft, vehicles, yachts, boats.
3. In case of ITR 3 & ITR 4-  Additional details regarding deposits or investments made in banks, investment in shares and securities, loans and advances given, insurance policies, cost of archaeological collections, drawings, paintings, etc. are to be provided.
4. Liability (loans) in relations to the abovementioned assets, investments.

For ITR1, ITR2, ITR 2A and ITR 4S, the schedule AL is given below:

For ITR 2 & ITR 4, schedule AL is given below:

How the amounts of assets and liabilities are to be filled-in?

Taxpayer is required to enter the COST of the assets mentioned.

1. Enter total cost of all the lands (in the form of plots, agricultural land etc.) owned by you.
2. Enter total cost of all the buildings (in the form of Flats, Bungalows, shops etc.) owned by you.
3. Enter total amount of Fixed Deposits, Recurring Deposits and Saving/Current Account Balances with all Banks.
4. Enter the total Cost of Shares, debentures, bonds, mutual funds units etc. held by you.
5. Enter the total amount of Insurance Premiums paid by you for insurance policies that did not mature on 31st March {Financial Year end}.
6. Enter the total amount of Loans and Advances given to friends / Relatives / others.
7. Enter the total amount of Cash in hand held as on 31st March {Financial year end}
8. Enter the Total Cost of Jewellery made of gold, silver, platinum or any other precious metal. Also include cost of Precious or Semi-Precious Stones owned by you.
9. Enter the Total Cost of Archaeological collections, drawings, painting, sculpture, antiques or any work of art purchased by you.
10. Enter the Total Cost of vehicles, yachts, boats and aircrafts owned by you.
11. Enter the amount of loans/liabilities borrowed to purchase the abovementioned Assets.

Do remember the following points while filling Schedule AL:

1. The assets mentioned will not include personal accessories i.e. wearing apparel, furniture held for personal use by the taxpayer or dependent any family member.
2. Taxpayer is required to mention the total amount of COST of the assets mentioned. However, where such assets are acquired by taxpayer by way of gift, will or inheritance; then Cost will be the Cost incurred by previous owner as increased by amount, if any incurred by taxpayer, for improvement.

What are the drawbacks of Schedule AL?

1. All assets, investments are required to be declared at cost in Schedule AL. However considering depreciation and appreciation in its value, declaration at cost acts as drawback and does not serve proper purpose. For instance, if you buy a vehicle, its value will start depreciating the movement you start using it, so it’s quite unfair to declare vehicle at cost. Similarly, if you have bought a piece of land at a certain price few years back however at the time of declaration on 31st March (financial year end), it’s value might be very high, so declaring it at cost would also be unfair the other way round.

1. Earlier, such declaration was required to be made in ITR 4, so most of these assets, investments were shown as business assets or investments in Financial Statements of a taxpayer. But now, even the salaried person has to declare it if his total income exceeds Rs. 50 lakhs during financial year. This will increase a burden of compliance.

1. It would be more difficult to estimate the cost if the assets are acquired by inheritance and if there are no records of the cost of purchase by the previous owners in case those are passed down from many generations.

How ITR Asset disclosure norms in the form of Schedule AL are going to affect taxpayers?

According to the Revenue Department, only 1.5 lakhs ultra-rich individuals whose total income would be above Rs. 50 lakhs are required to fill this schedule in ITR Form and hence 99.5% of taxpayers are not affected by this requirement.

Click here to know about “ITR Form 1 (SAHAJ) also covers Assets and liabilities of a taxpayer”.