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Balwant Jain

How to comply with requirement of furnishing details of Assets and Liabilities in New ITR Form

The ITR (income tax return)  forms for the the financial year ended 31st March 2016 have been notified by the government well in time this time. Generally, the forms are on the same lines as that of the previous forms except that the tax payers either an individual or an HUF have to furnish additional details of the assets and liabilities in case the taxable income exceeds Rs. 50 lacs in the year. Let us discuss what details are required to be submitted and how to comply with this requirement.

  • Why this additional details are called for?

Since the wealth tax has been abolished from the financial year 2015-2016 there are no means by which the income tax department can have details of various important assets held by high net worth tax payers.  So through these details the income tax department will have a tab on your assets and accretion over years.  Since the assets have to be stated at cost in the return, the changes over the years should be commensurate with the income returned by you over the years. With advanced use of technology the income tax department can easily find out any disproportionate increase in the assets over the years funded thorough undisclosed income.

  • Categorisation of the tax payer

For the purpose of details to be furnished the tax payers are divided in two categories. In the first category are the individual and HUF who are neither partner nor have any proprietary business or profession.  In the second category are the individual and HUF tax payers who have business income either as a partner of a partnership firm or as proprietor of any business or profession.  However, people who are taxed under presumptive taxation scheme for their business of professional income,  where a certain percentage of gross receipt is presumed to be the income or tax is payable at certain fixed percentage of the gross receipts,  are included in the first category.

  • Details to be furnished by the taxpayers who are neither partner  in a firm nor have own proprietary business of profession

These taxpayers can file their income tax returns in ITR 1, 2A, 2 and 4S depending on the nature of income. They have to submit details of immovable assets like land and building in addition to submit details of some specified movable assets like cash in hand, value of jewellery and  bullion. The details of vehicles, aircraft, yatch and boats are also required to be furnished in the ITR.  The amount of liability incurred against any of these assets is also required to be disclosed in the schedule of assets and liabilities.

  • Details to be furnished by the persons who either have share of profit from a partnership firm or have own proprietary business or profession

For the taxpayers in the second category,  who have to file either ITR 3 or 4,  in addition to the above details  have to furnish details of some additional financial assets like deposits in any bank account whether fixed deposit or current account or saving bank accounts. They also have to provide details of cost of insurance policies, loans and advances given and investments in shares and securities. Additionally they have to provide details of archaeological collections, drawings, paintings, sculpture and any work of art.

The logic for such differential between two classes of tax payers as regards the details of assets to be disclosed is not understandable. Such assets may also be owned by the salaried people some of whom are well paid including top management of companies who receive salaries but practically are engaged in business.

The tax payer has to provide the cost of these assets in case the same are not reflected in the balance sheet of the partnership firm in case of a partner and in the balance sheet of the proprietor business or profession.

  • Difficulties which the tax payer may face

Since all these assets are required to be stated at cost, the tax payers may find it difficult to find out the costs of the assets in case the same have been purchased long back and the cost details are not readily available with the tax payer. Likewise if the assets have been received by the tax payer as gift or as inheritance where the tax payer may not even have means to find out the cost. Likewise for cash balance it may not be possible to find out the actual cash balance in hand on 31st March 2016 in case the tax payer has not maintained books of accounts and did not record actual cash balance on that date.

Likewise for items like life insurance policies it may be difficult for the tax payers to arrive at the cost of the insurance polices because even the tax payers who maintain books of accounts the amount of life insurance premiums paid is generally debited to the capital account. In case of multiple insurance policies where some of the insurance policies might have matured it is difficult to identity the premium with the pending policies in case such break up of old payments of premium is not available. Moreover for some life insurance policies like term plans which are pure insurance products and and no element of investment can be attributed therein so cannot be treated as an asset at all.

Suitable clarifications from the CBDT well in time will help the tax payers in complying with the requirement in letter and spirit.

(The author is a CA, CS and CFPCM. Presently working as Company Secretary of Bombay Oxygen Corporation Limited. Views are personal. He can be reached at jainbalwant@gmail.com.)

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3 Comments

  1. Bisweswar Ghosh says:

    I am pensioner; TDS deducted on FDR receipts. I also sell and buy shares through Dmat. Prev FY 14-15 and Fy 15-16I used ITR2. Tax was charged @ 15% on Short Term Capital Gains of about Rs.80,000/- / Rs.1,50,000/- made in Shares. In the current FY 16-17 I expect the turnover in Share Trading to exceed Rs.20 crores and the STCG to exceed Rs.5 lacs. I want to know which ITR form to use and what will be rate of I.Tax and whether advance Tax is to be deposited at what interval.

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