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August 29, 2020

Income more than Rs 50 lakh? Know what all Assets and Liabilities you need to disclose in your ITR

Income more than Rs 50 lakh? Know what all Assets & Liabilities you need to disclose in your ITR

Black-money has been creating trouble for all the countries around the world. Every year, the government keeps introducing new laws with aim to target people dealing in it. 

Presence of black money in the economy not only widens the difference between rich & poor. But in turn push the inflation rates through the roof. Therefore the government is continuously working to grab its hold on circulation of black money by introducing new compliance every year.

The government has been introducing various changes to the income tax return (ITR) amendments for reporting of assets and liabilities by taxpayers.

Taxpayers with income of more than Rs 50 lakh have to give numerous disclosures of assets owned by them—full details of all immovable properties (with cost), cost of jewellery and bullion, cost of paintings and artefacts, cost of vehicles, total amount of bank deposits, cost of shares and securities, cost of insurance policies, total loans and advances, and cash in hand.

Such disclosure is given in “Schedule AL” which is a Statement of your Asset and Liability at the end of the year. It is mandatory if your total income exceeds Rs.50 lakh.

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Who needs to file Schedule AL?

If your total income in a previous year exceeds Rs 50 lakhs then you are mandatorily required to file Schedule AL.

This schedule is available in 3 different ITR forms – ITR-2, ITR-3 & ITR-4. Depending upon which ITR form you are required to use, Schedule AL needs to be filed, if your income exceeds Rs 50 lakhs.

Is the Limit of Rs 50 lakhs on Gross Income or Net Income?

Your income after all the deductions (net income) under Chapter-VI-A must be within the specified limit of Rs 50 lakh. If the net income exceeds Rs 50 lakh, you must file Schedule AL.

For instance, Gross Total Income of Mr. A is Rs. 52,00,000. He paid life insurance premium of Rs. 1,50,000 and contributed Rs. 50,000 to National Pension Scheme. Total income of Mr. A is Rs. 50,00,000 (Rs. 52,00,000 – Rs. 2,00,000). As it does not exceed ceiling limit of Rs. 50 lakhs, Schedule AL is not applicable.

What is included in Schedule AL?

This Schedule is to be filled by individuals and HUFs giving details of properties held by the assessee and the corresponding liabilities.

The assets to be reported will include land, building (immovable assets); financial assets viz. bank deposits, shares and securities, insurance policies, loans and advances given, cash in hand and jewellery, bullion, vehicles, yachts, boats, aircraft etc. (movable assets) and interest held in the asset of a firm or association of persons (AOP) as a partner or member thereof.

In the case of liabilities, all liabilities incurred in relation to the assets should be reported such as:

  • Housing loan
  • Vehicle loan
  • Personal loan

In the case of non-resident and resident but not ordinarily resident, the details of assets located in India are to be mentioned.

Jewellery includes:-

  • Ornaments made of gold, silver, platinum or any other precious metal or any alloy containing one or more of such precious metals, whether or not containing any precious or semi-precious stone, and whether or not worked or sewn into any wearing apparel
  • Precious or semi-precious stones, whether or not set in any furniture, utensil or other article or worked or sewn into any wearing apparel

What amount is to be reported in Schedule AL?

The amount in respect of assets to be reported will be:

  • the cost price of such asset to the assessee; or
  • where wealth-tax return was filed by the assessee and the asset was forming part of the wealth-tax return, the value of such asset as per the latest wealth-tax return in which it was disclosed as increased by the cost of improvement incurred after such date, if any.

In case the asset became the property of the assessee under a gift, will or any mode:-

  • the cost of such asset to be reported will be the cost for which the previous owner of the asset acquired it, as increased by the cost of any improvement of the asset incurred by the previous owner or the assessee, as the case may be; or
  • in case where the cost at which the asset was acquired by the previous owner is not ascertainable and no wealth-tax return was filed in respect of such asset, the value may be estimated at the circle rate or bullion rate, as the case may be, on the date of acquisition by the assessee as increased by cost of improvement, if any

What are the drawbacks of Schedule AL?

  • 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 is unfair to declare vehicle at cost.
  • Similarly, if you have bought a piece of land at a certain price few years back but at the time of declaration its value might be very high, so declaring it at cost would also be unfair the other way round.
  • It would be also 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.

The increased disclosure requirement creates a huge compliance burden on taxpayers, who will require significant time to collate such information and to ensure proper reporting, besides increasing the risk of making mistake while filing ITR. It discourages new taxpayers from filing their ITR.

It also requires disclosure of a significant amount of personal information, encroaching more and more on taxpayer privacy. However, it is important that individuals duly comply with the asset reporting requirement to avoid any questioning from the Tax Authorities at a later date.

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