Do you have to show your assets in your income tax return?

The income tax department has mandated high-income earners to disclose certain assets in their Income Tax Return (ITR). This is done to detect cases that have a disproportionate increase in assets compared to the reported income source to the government. 

The Income Tax Act mandates the taxpayers’ disclosure of assets and liabilities having taxable income of more than Rs.50 lakh in a particular financial year. This condition is only applicable to high-income earners, and hence the small taxpayers are relieved from this compliance. Forms ITR-1 and ITR-4 are applicable only when the total taxable income is less than Rs.50 lakh; the taxpayers filing these forms are not required to report their assets and liabilities in their ITR.  

Forms ITR-2 and ITR-3 have a schedule AL (Asset and liability statement), which is similar in both these forms except that ITR-3 requires an additional detail of interest in partnership firms if the taxpayers hold a share in the assets of the firm. 

Under this schedule, the details of assets held on 31 March are to be disclosed, and the details of assets disposed of during the year are also required to be disclosed. 

Immovable Assets reporting

• Immovable assets like land and buildings owned by the taxpayer as of 31st March of the financial year must be reported.
• All immovable properties, whether purchased or acquired through inheritance or gift, have to be disclosed.
• The reporting requires the description of the asset, address and cost of the immovable asset.
• For jointly owned property, details of the taxpayers share in the property are required to be mentioned.
• In case the cost of the property cannot be derived due to property acquired by way of inheritance or gift, fair market value (FMV) of the property as of 1 April 2001, which is the revised base year accepted by the income tax department for capital gains computations should be mentioned.
• For properties acquired after 1 April 2001, you can report the cost as the stamp duty value as the date of purchase or the cost mentioned in the valuation report obtained from a registered valuer.
• Under construction, the property is not required to be reported in the schedule of assets; however, the aggregate amount of advance paid (to builders or contractors) can be added to the ‘loans and advances’ and reported in the assets.

Movable property reporting

• Movable assets include shares and securities, cash and bank, insurance policies, loans and advances given, gold and jewellery, bullion, vehicles, boats and yachts, aircraft, work of art, etc. held by the taxpayer as of 31st March of the financial year are required to be reported.
• The taxpayers earning income from business or profession, who are required to maintain their books of accounts, have to submit the balance sheet in the Form ITR-3. These taxpayers have to report only the asset details not already included in their business balance sheet while filing ITR.
• The taxpayers are required to disclose all the details of shares and securities, jewellery, gold, bullion etc., held by them irrespective if they are purchased or acquired through gift or inheritance. The same rule of valuation will apply for deriving at the FMV of the asset in case it is not available.
• For bank balances, balances held in all the bank accounts like a savings account, recurring deposits, fixed deposits, PPF account, Senior Citizen Saving account are disclosed under the movable assets schedule. If the taxpayer has an overdraft facility or a home loan overdraft, disclosure of positive balance as of 31 March 2021 in these accounts is required.
• In the case of life insurance policies (including term life and traditional life insurance policies), the taxpayer may report the total premiums paid up to 31 March 2021 for disclosure purposes.
• Disclosure of vehicles includes two-wheelers, cars, yachts, boats, aircraft etc. as well. Also, note that the taxpayer has to disclose the cost of antique articles on the last day of the financial year if owned by him.

If the taxpayer has any liability outstanding concerning any assets reported, then the liability is also required to be disclosed under the head liabilities. For instance, outstanding home loans as of 31 March 2021 are required to be reported in liabilities. 

For any clarifications/feedback on the topic, please contact the writer at jyoti.arora@cleartax.in