Disclosure of Assets in the Income Tax Return (ITR)

Why the requirement to disclose the assets owned by you in the ITR

In order to detect the cases of disproportionate increase in the assets as compared to known source of income, the government has mandated individual tax payers to disclose certain assets in their ITR. Let us discuss.

To whom this requirement applies?

The provision for disclosure of assets is applicable for the tax payers whose taxable income exceeds the 50 lakh rupees in a year. So with such higher threshold limit smaller taxpayers are spared. Since ITR 1 and ITR 4 cannot be used by a taxpayer whose total income exceeds fifty lakhs, it does not apply those submitting ITR 1 or ITR 4.

Nature of the assets you have to submit in the ITR:

The format of the schedule AL is same for both the ITR form 2 and 3 except that for ITR 3 you are required to furnish details of your interest in the partnership firms etc where you have any shares in the assets of the firm. Since the details of asset to be reported are to be mentioned as on 31^st March 2021, you need not furnish the details of any asset which has been disposed off during the year.

Reporting of immovable Assets:

For immovable properties i.e. land and building owned by you as on 31^st March, 2021, you have to provide the description of the asset, its address and the cost of such property. All the assets owned by you have to be disclosed whether purchased by you or acquired through gift or inheritance. In case of jointly owned property, you need to furnish the details as regards your share in the property. While furnishing the figure of cost for property not bought by you and in case you do not know the cost incurred by the previous owner, and to play safe, in my opinion, you can disclose the fair market value of the property as on 1^st April 2001, which is accepted by the income tax department for capital gains computations in cases assets were acquired before 1^st April 2001. In case the asset was acquired later on, you can obtain a valuation report and state that value. Alternatively, you can state the stamp duty valuation of the property on 1^st April 2001 or the stamp duty value on the date of acquisition in which it came to be owned by you.

In case you have not received possession of an under construction property, you need not furnish the details of such property as an under constriction property is not a building. However, to be on safer side, the aggregate amount paid to the builder can be included under loan and advances.

Details of movable assets:

Items to be disclosed under the movable assets include various financial assets like cash in hand, balances with banks, investments in shares and securities, insurance policies, loans and advances given, and other movable asset like jewellery, bullion, vehicles, yachts, boats and aircraft, work of art etc. as on 31^st March 2021.

The tax payers who are engaged in any business or profession and maintaining books of accounts are required to submit the balance sheet of their business in the ITR 3. Such tax payers have to furnish the details of the assets which are not already included in their business balance sheet being furnished in the ITR.

As discussed in the context of immovable assets above, for assets not paid for by you, the same principle can be followed for all movable assets. You are required to disclose the details of jewellery and as well as bullion held in the form of bar and coins. For bank balances, you have to provide not only details of saving account but also of balance in any type of a bank account. So ensure to include balance in recurring deposits, fixed deposits, PPF account, Senior Citizen Saving account. For home loan overdraft or any overdraft account disclose the balance if it has positive balance on 31^st March 2021.

As regards value to be disclosed for insurance policies for traditional life insurance policies you may treat them as investments but in my opinion the pure term insurance plans cannot be treated as insurance because term plans do not have any survival benefits and in case you survive the term of insurance you do not get anything. But as differentiation has been made for various insurance policies and to be on safer side, I would urge you to furnish the total premiums paid upto 31^st March 2021 for all the life insurance policies for disclosure purposes. For disclosure of vehicles it will include not only the motor car but also two wheelers, yatch, boats, aircraft etc as well. For the vehicle not in use and either not discarded or maintained as antique items, you need to include them here for disclosure purpose. Please note you have to disclose the cost only even for any antique article.

The list of immovable assets is not exhaustive and certain assets like balance in provident fund account, NPS, superannuation account etc., balances with post offices, cooperative societies etc are not required to be disclosed in the ITR.

If there is any liability incurred in relation to any of the assets included above the value of liability has also needs to be disclosed under the head liabilities. So in case you have taken a home loan, you need to add the value of the loan outstanding as on 31^st March 2021 in liabilities.

Balwant Jain is a tax and investment expert and can be reached on jainbalwant@gmail.com and @jainbalwant on twitter.

(Republished with Amendments)