Guidelines to File Schedule AL Declaration in ITR

Guidelines to File Schedule AL (Assets and Liabilities) Declaration in ITR

The proliferation of black money poses significant challenges to economies worldwide. Governments continuously introduce new regulations aimed at curbing the circulation of illicit funds. The presence of black money not only exacerbates income inequality but also fuels inflation.

To combat these issues, the Indian government has implemented various compliance measures, including the Schedule AL (Assets and Liabilities) in Income Tax Return (ITR) forms. By understanding and correctly filing Schedule AL (Assets and Liabilities), taxpayers contribute to the transparency and integrity of the financial system. This schedule mandates the disclosure of certain assets and liabilities by taxpayers meeting specific criteria & hereunder is guidelines for complying with the requirements of Schedule AL in your ITR

Assets and Liabilities Declaration in ITR

What is Schedule AL (Assets and Liabilities) in ITR?

Schedule AL requires taxpayers to disclose details of their assets and corresponding liabilities. The main objective behind this requirement is to maintain a record of assets owned by individuals with substantial income.

Who is required to File Schedule AL (Assets and Liabilities) in ITR?

Applicability of Schedule AL-Income Threshold for Schedule AL (Assets and Liabilities)

The INR 50 lakh threshold is considered after deductions under Chapter VI-A. For example, if your total income before deductions is INR 51,50,000 and you claim a deduction of INR 150,000 under Section 80C, your net taxable income will be INR 50,00,000. Since this does not exceed INR 50 lakhs, you are not required to file Schedule AL (Assets and Liabilities).  This schedule is included in the following ITR forms:

• ITR-2
• ITR-3
• ITR-4

The requirement to file Schedule AL depends on the ITR form applicable to the taxpayer and the income threshold.

Does the limit of ₹50 lakhs apply to gross income or net income?

The limit applies to net income after all deductions.

Balance Sheet and Schedule AL for Business/Profession Taxpayers

Taxpayers engaged in business or profession are required to file a balance sheet along with their Income Tax Return (ITR) to provide a clear picture of their financial position at the end of the fiscal year. The balance sheet lists all the assets owned and liabilities owed by the taxpayer.

Details Required in Schedule AL (Assets and Liabilities)

The disclosure requirements in Schedule AL vary slightly between different ITR forms:

• Income tax Return Form -ITR-3:
  • In addition to the disclosures required in ITR-2, taxpayers must also provide information on interests held in assets of a firm, Association of Persons (AOP), as a partner or member.
• Income tax Return Form -ITR-2:
  • Movable Assets: Bank deposits, shares and securities, insurance policies, loans and advances given, cash in hand, jewellery, bullion, vehicles, yachts, boats, aircraft, etc.
  • Immovable Assets: Land and buildings.
  • Liabilities: Corresponding liabilities against the disclosed assets.

Definition and Disclosure of Assets

1. Types of Assets: The term ‘assets’ includes:
   • Immovable Assets: Land and buildings.
   • Financial Assets: Shares, securities, and deposits.
   • Loans and Advances: Any loans and advances given.
   • Insurance Policies: Details of all insurance policies.
   • Cash in Hand: Amount of cash held.
   • Jewellery: Ornaments made of gold, silver, platinum, or any other precious metal, or their alloys, whether or not containing precious or semi-precious stones.
   • Vehicles: All vehicles owned.
   • Movable Assets: Yachts, aircraft, boats, etc.
   • Bullion: Precious metals in bulk form.
2. Disclosure at Cost: Assets must be disclosed at their cost price. This includes any cost of improvement incurred on the asset.
3. Non-Residents and Not Ordinarily Residents: These individuals must provide details of their assets situated in India. ensure that all the specified details are accurately reported. The purpose of these disclosures is to maintain transparency and compliance with tax regulations, ensuring that the taxpayer’s asset holdings in India are consistent with their reported income.
4. Jewellery Definition:
   • Includes ornaments made of precious metals or their alloys, with or without precious or semi-precious stones.
   • Also includes precious or semi-precious stones set in any utensil, furniture, or apparel.
5. Gifted Assets:
   • If the asset is acquired by gift, will, or other modes as specified in Section 49(1), the cost should be declared as the cost to the previous owner plus any cost of improvement incurred by the previous owner.
   • If the cost is not ascertainable and no wealth tax return was filed, the value can be estimated based on the circle rate or bullion rate at the time of acquisition.
6. Disclosure of Liabilities

All liabilities incurred in relation to the disclosed assets must be reported, including Housing loans, Vehicle loans, Personal loans

Reporting in Schedule AL (Assets and Liabilities)

Basic Key points to remember while filling Schedule AL:

• Assets should be disclosed at their cost price. Assets must be disclosed at their cost price. Include any cost of improvement incurred.

• If an asset was part of a wealth tax return (now abolished), the value from that return should be used.
• Any improvements to the asset should be included in its value.

• Non-residents or not ordinarily residents must disclose assets located in India. Non-residents or not ordinarily residents only assets located in India need to be disclosed by NRI and RNOR individuals.
• Liabilities should be disclosed on an actual basis. All liabilities related to the assets should be reported, providing a clear picture of the taxpayer’s financial position in India.

• Challenges with Schedule AL : Assesses may face the following issues while filing Schedule AL:

• • Difficulty in determining the cost of assets if records are not available.
  • Uncertainty about whether personal assets need to be disclosed.

Conclusion

To ensure high net worth individuals and other entities do not evade taxes, the government introduced Schedule AL (Assets and Liabilities) after the abolition of the wealth tax. This measure was taken to address discrepancies between reported income and actual assets. Schedule AL requires taxpayers with a total income exceeding ₹50 lakhs from any source to disclose all their assets and corresponding liabilities in their ITR. While the increasing disclosure requirements make compliance more demanding, these measures are essential for tackling the issue of black money.

Newly added High-Value Transactions threshold limits

S. No	Transaction Type	Min. Amount (Rs.)
1	Domestic class Air travel / Foreign travel	any
2	Deposit / Credits in non-current Accounts	25 Lakhs
3	Health Insurance premium	20,000
4	Electricity Consumption per year	1 Lakh
5	Share transactions in DMAT Accounts / Bank Lockers	any
6	LIC	50,000
7	Purchase of Jewelry, white goods, painting, marble, etc	1 Lakh
8	Payment of educational fee/donations	1 Lakh
9	Payment to Hotels	20,000
10	Deposit / Credits in Current Accounts	50 Lakhs
11	Payment of Property tax per annum	20,000

Additional threshold limits added to enforce the Income-tax

1. Deduction/tax collection provision at a higher rate for no tax return filers.
2. Compulsory returns for taxpayers Provision

• • All professionals with sales above Rs. 50 Lakh
  • All whose rental payment exceeds Rs. 40,000 a month
  • Which transactions are above Rs. 30 lakh

Here are few tips for avoiding high-value financial transactions with Income tax notices;

• Stay up to date with your PAN details.
• Reveal in your ITR all and correct revenue you have earned during the FY.
• Before the deadline, you must always file your ITR.
• Cross-check your From 26AS for all the TDS entries. This exercise can be repeated once a quarter.
• If any AIR transactions are reported, check your Form 26AS.
• Record all your valuable financial transactions, investments and expenditures