Individuals and Hindu Undivided Families (HUFs) whose total income exceeds Rs 50 lakh are required to disclose all assets held as on the last day of the year in ‘Schedule AL’ in ITR Form No. 2, ITR Form No. 3 and ITR Form No. 4.
In the income tax return, apart from income, you are required to disclose your assets as well. But who has to disclose and which are these schedules? Individuals and Hindu Undivided Families (HUFs) whose total income exceeds Rs 50 lakh are required to disclose all assets held as on the last day of the year in ‘Schedule AL’ in ITR Form No. 2, ITR Form No. 3 and ITR Form No. 4. The assets that are required to be disclosed under this schedule are:
- Immovable assets i.e. land and building;
- Movable assets i.e. a] jewellery, bullion, b] archaeological collections, drawings, paintings, sculpture or any work of art, c] vehicles, yachts, boats and aircrafts, d] financial assets which include bank deposits, shares and securities, insurance policies, loans and advances given, and e] cash in hand; and
- Interest held in assets of a firm or association of persons as a partner or member thereof.
Further, liability or borrowing in relation to these assets are also required to be declared separately. Persons who are residents and ordinary residents in India are required to declare all assets held by them in Schedule AL, whether located in India or outside India. However, non-residents and resident but not ordinarily residents are required to disclose only details of assets located in India.
Watch this video:
In addition to Schedule AL, persons who are residents and ordinary residents are also required to provide details of foreign assets separately in ‘Schedule FA’ of the income tax return. Non-residents and residents but not ordinary residents are not required to do so. Unlike Schedule AL, ‘Schedule FA’ is to be filed in all cases irrespective of income earned during the year.. Therefore, irrespective of income earned during the year, details of foreign assets need to be disclosed in the income tax return. Further, whether or not the asset is held as at the last day of the financial year, if the same was held at any time during the financial year, it needs to be disclosed.
The foreign assets that need to be disclosed in the income tax return form are foreign bank accounts, financial interest in any entity, immovable property, other capital assets, accounts in which the person has signing authority and trusts created in which the person is a settlor, beneficiary or trustee. The total cost of investment and peak balance in bank account, converted into INR, is required to be disclosed in this schedule.
Watch this video:
The income earned from foreign assets such as interest, rent, etc. needs to be reported in Schedule FA which should be included in the computation of total income as well. In addition to the above, Indian bank accounts held by a taxpayer is required to be furnished in the return form. Further, non-resident taxpayers who are claiming income tax refund and not having an Indian bank account may, at their option, furnish details of one foreign bank account.
It is pertinent to note that return filing is mandatory for residents owning foreign assets (as described above), even though their income is less than the exemption limit or there is no income earned at all. Failure to file return or disclose foreign assets in the return may attract stringent penalty and prosecution provisions. Hence, not only income, disclose your assets as well in the return!
By Nilpa Shah
(The author is a Chartered Accountant)