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A taxpayer engaged in business/profession is required to file details of the assets owned and liabilities owed by him through a Balance Sheet in the Income Tax Return (‘ITR’). A balance sheet helps in understanding the taxpayer’s financial position at the year-end. The government, after the abolition of wealth tax, introduced Schedule AL in ITR to ensure there is no tax evasion by high net worth individuals and other entities as there have been many instances previously wherein it was found that the assets of a taxpayer are not in line with the income earned by him. To keep a check on the assets acquired and the income earned, the tax department has mandated that all assets and their corresponding liabilities be disclosed in the income tax return if taxpayers earn more than INR 50 lacs from any source. Read on to know if you are required to file this schedule and more details on the same.
Schedule AL is a part of ITR, which requires disclosure of all assets and liabilities held by a taxpayer at the end of every financial year. The assets under this schedule include immovable property, movable property, and other financial assets held by the assessee. Liabilities include all the liabilities in relation to the assets.
This schedule is to be filled mandatorily by individuals and Hindu Undivided Families (HUF) if their total income after all the deductions exceeds INR 50 lacs and they have not engaged in any business or profession during the financial year. They must provide details of immovable assets, financial assets, and movable assets held by them and all the corresponding liabilities. The individuals and HUFs having total income below INR 50 lacs are not required to file Schedule AL. Therefore, the people who are eligible to file ITR 1 (Sahaj) or ITR 4 (Sugam) are out of the scope of this requirement.
However, for those engaged in business/profession who are required to furnish their Balance Sheet, the assets that have already been included in the balance sheet are not required to be disclosed again. Only the assets that have not been disclosed in the Balance Sheet are required to be reported in this Schedule. The above requirements are applicable for those filing ITR 2 and ITR 3.
Note that non-residents and not ordinarily resident individuals are required to provide details of their assets situated in India.
The assets to be disclosed in the income tax return will not include any personal effects other than those specifically asked. Personal effects means movable property (including furniture, wearing apparel) held for personal use by the taxpayer or any family member dependent on him. The assets to be reported will include the following:
- Immovable property
Regarding land & building, you are required to furnish the details of land and building owned by you, whether singly or jointly. The details to be reported are:
You must disclose the details of all immovable property acquired through gifts or as inheritance as well. As for reporting the liability in respect of such immovable property, you must disclose the amount of loan taken for acquiring such property as well as any money borrowed against the security of such property.
- Financial assets
Financial assets viz. bank deposits, shares and securities, insurance policies, loans and advances given, cash in hand. Bank deposits include fixed deposits, recurring deposits, and saving/current account balances. As for liability, you must disclose the details of liability incurred for acquiring such assets or any money borrowed against the security of the aforementioned assets.
- Movable property
Various assets, such as jewelery, bullion, vehicles, yachts, boats, aircraft, etc., are required to be disclosed under movable properties. You must also disclose the details of the vehicles, yachts, boats, aircraft, etc., which are no longer in use and also have not yet been discarded or have been retained and maintained as antique collections.
Note: jewelery here includes-
(a) Ornaments made of platinum, gold, silver, or other precious metal or an alloy comprising of such precious metals, whether containing any precious or semi-precious stone or not, and whether it is sewn or worked into any wearing apparel or not;
(b) Precious or semi-precious stones, worked or sewn into any wearing apparel, whether or not set in any furniture, utensil, or other article.
- Interest held in the assets of a firm or an association of persons (AOP)
If you are a partner of a firm or a member of an AOP, then your interest held in the assets of a firm or AOP needs to be disclosed with the PAN of the entity.
The assets must be disclosed at:
(a) the cost incurred by the taxpayer to obtain such an asset and any subsequent cost of improvement can also be added; or
(b) where the asset was forming part of the wealth-tax return filed by the taxpayer, the value of such asset as per the latest wealth-tax return in which it was disclosed and any subsequent cost of improvement can also be added.
However, if the taxpayer received the asset as a gift or under a will or through any mode not considered as transfer under section 49(1), then the amount at which such asset be reported is:
(a) The cost for which the previous owner had acquired it and any subsequent cost of improvement incurred either by the previous owner or the taxpayer can also be added.
(b) Where the cost of such asset is not ascertainable, and wealth tax return was also not filed for that asset, then the value may be estimated at the circle rate or bullion rate as on the date of acquisition by the assessee, and any subsequent cost of improvement can also be added.
Assets mentioned cannot include personal accessories such as wearing apparel, furniture for personal use, either by the taxpayer or by a dependant family member.
The annual gross income of Pinky is Rs.53 lakhs. She gets a deduction of Rs.1.5 lakhs for the investments and expenditures made under sections 80C and 80D. She is also eligible for the deduction of Rs.1.5 lakhs per annum as home loan interest against the home loan installments she has been paying. These deductions reduce her new income to Rs.50 lakhs.
In this case, the net income of Ms. Pinky does not exceed Rs.50 lakh. Therefore, she is not required to file schedule AL. In other words, if the net income after deductions exceeds Rs.50 lakhs, only then the assessee is required to file schedule AL.
Hope this article helped you learn more about schedule AL. Complying with Schedule AL guidelines ensures transparency in tax reporting, helps maintain financial integrity, and enables the tax department to keep a check on the assets acquired by taxpayers in line with their reported income. It is crucial for eligible individuals and HUFs to fulfill this requirement to remain compliant with tax regulations and avoid any potential penalties or legal consequences. Tax2win’s eCA assisted services can help ensure the same. Get assistance from highly experienced and qualified Chartered Accountants.
Here are a few guidelines you must comply with while filing Schedule AL:
If the asset is a gift, will, or any other mode in Section 49(1) and not covered by the above clause:
In the case of liabilities, all liabilities incurred in relation to the assets should be reported such as:
After all deductions, your net income should be considered for ascertaining the limit of INR 50 lacs.
E.g.
1. Your gross income is 50.5 lacs, and you are eligible for a deduction of INR 1.5 lacs under section 80C for repayment of a housing loan. Will you be required to file Schedule AL?
You must fill up the Schedule AL in your ITR if your total income exceeds INR 50 lacs. In the given case, since your net income is INR 49.5 lacs (INR 50.5 lacs - INR 1.5 lacs) which is within the specified limit of INR 50 lacs, you will not be required to fill up the schedule.
2. Your gross income is 51.5 lacs, and paid INR 1.5 lacs towards life insurance premium, which is eligible for 80C deduction. Are you required to file Schedule AL?
In the given case, your net income is INR 50 lacs (INR 51.5 lacs - INR 1.5 lacs) which does not exceed the limit of INR 50 lacs. Therefore, you will not be required to fill up the schedule.
