Disclosure of Assets in your Income Tax Return

Ashish M. Shaji

10 Sep, 2021

According to the Income Tax Department, those with high income need to disclose certain assets in their Income Tax Return. The objective behind this disclosure of assets is to detect cases with disproportionate increase in assets compared to the reported income source to the government. In this article, we have discussed about reporting of immovable and moveable assets.

Disclosure of Assets and Liabilities

As per the Income Tax Act, it is mandatory for taxpayers to disclose assets and liabilities having taxable income of more than 50 lakh rupees in a particular financial year. The condition of disclosing assets is only applicable to those with high income, and therefore small taxpayers have relief from this compliance burden. Forms ITR-1 and ITR-4 shall be applicable only when the total taxable income is lesser than 50 lakh rupees. Those taxpayers who file these forms don’t have to report their assets and liabilities in their Income Tax Return.

Forms ITR-2 and ITR-3 have schedule AL meaning Asset and Liability Statement that is similar in both terms except that ITR-3^[1] requires an additional detail of interest in partnership firms in case where taxpayers hold a share in the assets of the firm.

Under schedule AL (Asset and Liability Statement), the details regarding assets held on March 31 should be disclosed, and the details of the assets disposed of in the year also need to be disclosed.

Disclosure of Assets: Reporting of Immovable Assets

Details regarding Reporting of immovable assets are mentioned below:

• Immovable assets such as land and building owned by the taxpayer as of 31^st March of the financial year should be reported;
• All immoveable properties, whether purchased or acquired through inheritance or gift, should be disclosed;
• In reporting the description of the asset, address, and the cost of the immovable asset should be disclosed;
• In case of property which is jointly owned, the details of the taxpayers share in the property must be mentioned;
• If the cost of the property cannot be derived due to the reason that the property was acquired through inheritance or gift, fair market value of the property as of April 1, 2002, which is the revised base year accepted by the department of the income tax for computation of capital gain should be mentioned;
• In case of properties that have been acquired after 1^st April 2001, reporting of the cost can be made as the stamp duty value as the date of the purchase or the cost specified in the valuation report obtained from a registered valuer;
• In case of property under construction, the property is not to be reported in the schedule of assets, but the aggregate amount of advance paid to builders or contractors may be added to the loans and advances and reported in the assets.

The list of immovable assets is not exhaustive, and assets such as balance in provident fund account, NPS, superannuation account etc., are not required to be disclosed in the ITR.

Disclosure of Assets: Reporting of Movable Property

Details regarding Reporting of movable assets are mentioned below:

• Movable assets such as shares and securities, cash, insurance policies, loans and advances given, gold and jewellery, bullion, vehicles, boats and yachts, aircraft, work of art etc. held by the taxpayer as of March 31 of the financial year should be reported;
• Those taxpayers who earn income from business or profession who are required to maintain books of accounts should submit the balance sheet in the Form ITR-3. Such taxpayers are required to report only the asset details that are not already included in their business balance sheet while filing the ITR;
• The taxpayers should disclose details of the shares and securities, jewellery, gold, bullion etc., held by them regardless of the fact that they are purchased or acquired through gift or inheritance. The same rule of valuation shall apply for deriving at the FMV of the asset if it is not available.
• In case of bank balances, those balances that are held in bank accounts such as savings, recurring deposits, fixed deposits, PPF account, Senior citizen savings account should be disclosed under the movable assets schedule. In case of taxpayer having the overdraft facility or a home loan overdraft, disclosure of positive balance as of March 31, 2021, in these accounts is needed;
• In case of life insurance policies, including the term life and traditional life insurance policies, the taxpayer can report the premiums paid up to march 31, 2021 for disclosure purposes;
• Vehicles disclosures includes two-wheelers, cars, boats, yachts, aircraft etc. Further, the taxpayer is required to disclose the cost of antique articles, if owned by him, on the last day of the financial year.

Conclusion

Hence, the disclosure of assets helps in identifying the cases with disproportionate increase in assets compared to the reported income source to the government. It may be noted here that in case where the taxpayer has any liability outstanding of any assets reported, the liability should be disclosed also under the head liabilities. For instance- outstanding home loans as of March 31, 2021, should be reported in liabilities.

Read our article:Know the Various Types of Income Tax Assessments