Traditionally, the variation in dopant concentration has been believed to be the primary factor for activating and modulating the optical properties, particularly band gap, in semiconducting oxides. However, in this work, with the help of Al doped SnO2 system, it is shown that some secondary factors such as particle size and oxygen vacancy concentration plays a decisive role in determining the nature of the band gap. Here, an attempt was also made to dissolve the long standing controversy about the nature of the band gap in Al doped SnO2. Nanoparticles of Sn1-xAlxO2 (x = 0.0, 0.03, 0.06, 0.09) have been synthesized by the gel-combustion method. Structural study by XRD reveals the formation of samples in a single tetragonal rutile phase. The microstructural study by TEM reflects a decrease in particle size with increase in Al doping. The XPS study unfolds an increase in oxygen vacancy concentration with increase in Al doping. Intriguingly, the band gap of SnO2 is found to increase with increase in Al doping. The PL study not only shows the near band edge emission, but also supports the blue emissions due to defects such as singly and doubly ionized oxygen vacancies. Nonetheless, magnetic hysteresis studies reveal the room temperature ferromagnetism (RTFM) in pristine and Al doped SnO2 samples which are ascribed to the presence of oxygen vacancies. The DFT calculations shows that the Al incorporation in SnO2 also contributes to the RTFM, which is reflected as the breaking of spin up/spin down symmetry and localization of spin charge density. Nevertheless, synthesized Al doped SnO2 nanoparticles with increased oxygen vacancy concentration, semiconducting behavior and room temperature ferromagnetism can be used for photocatalytic, optoelectronic and spintronic applications.