BackInclude assets, liabilities, pass-through income in tax returns
Be sure to fill in information needed under two new segmentsSchedule AL and Schedule PTI
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The income-tax return (ITR) forms to be used this year are similar to what were used last year. But of the few changes that have come about, an important one is the introduction of two new sections—Schedule AL and Schedule PTI.
Schedule AL
The ‘AL’ stand for assets and liabilities. This Schedule has been added to all ITR forms applicable to individuals and Hindu Undivided Families (HUFs). An assessee whose income was more than 50 lakh during the previous financial year, after combining all sources—income from salary, business and profession, house property, capital gains and others—needs to fill in details under this section. Assessees who need to file their returns using ITR1, ITR2, or ITR2A need to disclose information of their assets and liabilities at the end of the relevant FY. This will, for example, include values of immovable assets such as land and buildings, and movable assets such as cash in hand (including savings accounts balance), jewellery, or bullion. Liabilities (loans) related to the disclosed assets also have to be mentioned.
Those using ITR3, ITR4 or ITR4S have to do more. They have to give additional information of financial assets such as shares, mutual funds, and so on, in the Schedule AL. “To make up for the abolishment of wealth tax, the government has introduced Schedule AL; wherein disclosure of all assets is mandatory for all categories of taxpayers who have income of more than 50 lakh," said Suraj Nangia, partner, Nangia & Co.
Schedule AL was already a part of ITR3 and ITR4, but a few changes have been introduced. “Earlier, only business assessees with income above 25 lakh were required to disclose the non-business assets and liabilities," said Sudhir Kaushik, co-founder and chief financial officer, TaxSpanner.com.
According to the new disclosure rules, only the cost of the assets has to be disclosed and not their market value as on 31 March 2016. This means that if you owned, say, a house on 31 March 2016, which you had bought in 2010 for 75 lakh, then you need to write 75 lakh as the value of the immovable asset, irrespective of what the market value of the house was on the last day of March 2016.
What if you don’t know the price at which the asset was bought? For instance, if it’s an ancestral property or something received as gift, “you need to know the cost paid by the previous owner to acquire it", said Homi Mistry, partner, Deloitte Haskins & Sells LLP. If that is not available, then it can be valued by a certified valuer. Keep the calculation documents with you.
Schedule PTI
‘PTI’ stands for pass-through income. This is income that has not been taxed at source or its origin and is passed on to the actual recipient of the income, without any taxation. “In last year’s Budget, certain incomes were given ‘pass through’ status, which broadly implies that the income will be taxed in the hands of the investors rather than that of the fund itself," said Nangia. Sections 115 UA and 115 UB of the income-tax Act provide that distribution of income by a business trust or investment fund to its investors (unit holders) shall be paid to them without deduction of tax. Income distributed by such funds or trusts is taxable directly in the hands of investors and not in the hands of the funds or trusts.
Schedule PTI has been inserted in all ITR forms for individuals or HUFs except ITR-1. An assessee has to include details of any pass-through income from a business trust or an investment fund. The intention is to capture details of incomes from sources that have a pass-through mechanism.
Besides individuals, funds and trusts also have to report distribution of income to the tax authorities. Using these details given, the tax department will be able to reconcile the data and track defaulters who try to evade paying tax on such incomes.
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