According to the Income Tax Department, individuals with higher incomes are required to disclose certain assets in their Income Tax Return (ITR). The Disclosure of Assets in the Income Tax Return (ITR) is made mandatory. The necessity was applied in 2016 and has since been periodically changed. Let us discuss more it in detail.
Why there is a need to disclose assets belonging to you in the ITR?
To find cases of unrestricted inflation against the known sources of revenue, the government has authorized individual taxpayers to disclose certain assets in their ITR.
To whom does this requirement apply?
The disclosure of the assets applies to taxpayers whose taxable income exceeds Rs 50 lakh per year. So at such a high rate, small taxpayers survive. Since ITR 1 and ITR 4 cannot be used by a taxpayer with a total income of more than 50 lakhs, it does not apply to those who submit ITR 1 or ITR 4.
Which assets can be submitted in ITR?
The AL schedule format is the same for both ITR forms 2 and 3 except that in ITR 3 you are required to provide details of your interest to affiliated firms etc. when you have shares in a firm asset. As details of the reported assets will be announced by 31 March 2021, you are not required to provide details of any disposal during the year.
Immovable Property Reporting
For immovable property, you must describe the property, its address, and the cost of the property. All personal property must be disclosed to be purchased by you or received by gift or inheritance. If the property is jointly owned, you need to provide details about your share in that area. If the asset was subsequently acquired, you may receive a measurement report and quote that amount. Alternatively, you can state the total value of the local stamp on April 1, 2001, or the value of the stamp tax on the date of acquisition.
In the unlikely event that you did not get possession of a site under construction, you are not required to provide details of that property as the under-construction area is not a building. However, to be on the safe side, the total amount paid by the builder can be included under the loan and prepaid amounts.
Movable assets: details to be given
- Assets that will be disclosed under movable assets include various financial assets such as cash in hand, balances and banks, investment in securities, insurance policies, loans, and developments provided, and other movable assets such as jewelry, capital, vehicles, boats, and aircraft, artwork, etc. as of 31 March 2021.
- Taxpayers who do any business or profession and who keep accounts are required to submit their business balance sheet to ITR 3. Those taxpayers must provide details of assets that have not yet been included in their balance sheet is provided in the ITR.
- You are required to disclose the details of the jewelry and the capital held in the form of a bar and coins. For bank balances, you must provide not only the details of the savings account but also the balance of any type of bank account. So make sure you balance the regular deposits, fixed deposits, PPF account, and Senior Citizen Retention account. A home loan overdraft or any overdraft account discloses the balance if it has a positive balance dated 31 March 2021.
- As different insurance policies have been made and on the safe side, provide the total amount of premiums paid by 31 March 2021 for all life insurance for disclosure purposes. Vehicle disclosure will include not only the car but also two wheels, yacht, boats, planes, etc. For vehicles that may be used and not disposed of or not maintained as antiques, you need to include them here for disclosure. Please note that you should only disclose the cost of any older article.
- The list of immovable assets is incomplete and certain assets such as balance in provident fund account, NPS, pension account, etc., balances and post offices, co-operatives, etc. do not need to be disclosed in the ITR.
- If any debt is incurred in connection with any of the assets included above the credit value they should also be disclosed under the principal liability. So if you take out a home loan, you need to increase the amount of the remaining loan from 31 March 2021 in debt.
Problems with the Disclosure of Assets in the Income Tax Return (ITR)
There are many problems with the disclosure of assets in the Income Tax Return (ITR) discussed below:-
While mandatory disclosure of assets in income tax returns may assist the taxpayer in obtaining information on the assets of high-value persons, further clarification is expected from the government on how to fill in the details in this system.
Should all my gross income be within limits?
Your income after all deductions (total income) under Chapter-VI-A should be within the specified limit of Rs 50 lakh to avoid the requirement of the AL schedule. Therefore, if the income exceeds Rs 50 lakh, you must enter Schedule AL.
The disclosure of assets in the Income Tax Return (ITR) helps to identify cases of unparalleled increases in assets compared to the source of revenue reported to the government. It may be noted here that if the taxpayer has any liability for any reported assets, the liability should be disclosed under the principal liabilities.