The tax filing season is here, and taxpayers with incomes exceeding ₹50 lakh have an additional task: declaring both their movable and immovable assets. According to the income tax (IT) laws, individual and Hindu Undivided Family (HUF) taxpayers with net income of over ₹50 lakh must fill out details of their assets in Schedule AL (asset and liability) of ITR forms 2 or 3. This includes immovable property, financial assets, vehicles, art, sculptures, and corresponding liabilities.
Schedule AL was introduced in 2016 after the wealth tax was discontinued. “The government wanted a monitoring system to check if the value of a taxpayer’s assets corresponds to the income earned by her. Thus, Schedule AL was introduced,” said Prakash Hegde, a chartered accountant, and principal consultant of direct taxation at Acer Tax & Corporate Services LLP.
To help taxpayers understand Schedule AL, Mint presents a Q&A guide:
Declare all your financial and non-financial assets, including cash, jewellery, vehicles, archaeological collections, drawings, paintings, sculptures, and real estate. Schedule AL has separate columns for each category.
According to experts, these assets should be declared under the shares and securities column. Mayank Mohanka, founder director at TaxAaram India, said: “Tax laws don’t define securities specifically, so it’s safe to declare PF, NPS, or REITs, under this category.” Consolidate your investments in stocks, mutual funds, NPS, EPF, government securities, and derivatives under this section. Declare the derivatives bought on 31 March, not for the entire year.
No, declare assets at their purchase cost. “Taxpayers often mistakenly declare the fair market value. For insurance policies, declare the premium paid and, for cars, declare the original purchase amount, regardless of the age of the vehicle,” Hegde added.
For mutual funds, stocks, fixed deposits, and other investments, declare the total cost of all investments held at close of the year and not their year-end value. If an investment was sold in the same year it was bought, its cost of acquisition is not to be declared. “For bank savings account and cash, balance as on 31 March needs to be declared,” Hegde said.
Liabilities or loan amounts should be declared based on the outstanding loan as of 31 March. This implies that the loan amount will decrease annually. “Some taxpayers worry that this could lead to a mismatch with their income. For instance, if someone bought a car worth ₹50 lakh with a loan of ₹40 lakh, the loan value in the fourth or fifth year will become small, but the value of the car will still be ₹50 lakh. It’s not a matter of concern as even if the IT department questions the taxpayer regarding affordability of the asset, they can show past declarations to justify the mismatch,” explained Hegde.
Only loans used to purchase assets should be declared. Personal loans or outstanding credit card balances, unless used for asset acquisition, should not be disclosed.
Declare inherited or gifted properties at the cost for which the previous owner bought them. If the original value is not available, use the circle rate on the acquisition date, or the date the circle rate was introduced.
No, it won’t. According to Mohanka, the tax authorities may ask for an explanation, but this can be justified with documents.
Yes. Declare foreign assets in both Schedule FA and AL. “In schedule FA, foreign assets are declared as per the calendar year, but in AL it’s as per financial year. Further, if you held a stock even for a day, it should be declared in schedule FA, whereas such a stock is not to be declared in Schedule AL. Only those assets that are held as on 31 March are to be declared,” Mohanka said.
Hegde said the declared value will also vary in the two schedules. “FA schedule asks for the current market value, along with the cost of acquisition, whereas AL only asks for the latter.”
Such cases fall under the clubbing provision for income tax, requiring the taxpayer who funded the investments to declare them in their ITR, Hegde said.
Karan Batra, managing partner, Chartered Club, agreed. This especially applies to cases when the spouse who has paid the amount is a joint owner. “When the spouses are joint owners in a house property, but one of them has fully paid the purchase amount, he or she should declare the full property cost in their AL. In cases where the spouse, who has paid is not a co-owner or a joint holder, which is usually the case for FDs or MFs, he would have gifted the asset to his spouse and does not have to report the asset in his AL.”
No, assets declared in the business balance sheet are not required in Schedule AL. For example, if a business owner’s car is part of the enterprise’s balance sheet, it doesn’t need to be declared in AL. However, personal assets, such as a house, must be declared.
Currently, there is no specific penalty for non-disclosure in Schedule AL. “This is unlike the FA schedule, which gets scrutinised under the Black Money Act and attracts a penalty of ₹10 lakh," said Hegde.
"That said, I recommend eligible taxpayers to correctly declare all their assets and liabilities as it creates a trail. If the tax department questions you with regard to the value or ownership of any of your assets in the future, you will have proof to show that you have been declaring it, and the tax department has accepted your declarations in the past,” he added.
However, Batra cautioned that the IT department may levy penalties for inaccurate or omitted asset disclosures. “The penalty ranges from ₹25,000-50,000 depending on whether non-declaration led to tax evasion or not.”
