Wealth Tax!!
Very few tax payers’ in India
have heard of it and still fewer pay it.
However, ignore it only at
your own risk!
As per Indian Wealth Tax Act,
1957, wealth tax liability arises if market value of some assets (net of
liabilities) exceeds Rs. 30 lacs.
The wealth tax act is supposed
to bring into the tax net unproductive, non-essential & idle assets held by
an assessee. Two of the biggest
obsessions of Indian investors—property & gold thus are naturally included
in the definition of wealth and thus are subject to wealth tax. For example if
you own a second house which is not
self-occupied nor is given out on rent, then the(market) value of such second
house as on the valuation date(net of any liability to acquire such second
house) will be subject to wealth tax. Gold, silver, whether bought, gifted or
inherited forms part of computation of wealth.
Under Sec 2ea of wealth tax
act, 1957 the following “assets” will be included in the definition of wealth:-
- any building or land appurtenant thereto (hereinafter referred to as "house"), whether used for residential or commercial purposes.
- motor cars
- jewelry, bullion, furniture, utensils or any other article made wholly or partly of gold, silver, platinum or any other precious metal
- urban land
- yachts, boats and aircrafts (other than those used by the assessee for commercial purposes) ;
- cash in hand, in excess of fifty thousand rupees, of individuals and Hindu undivided families and in the case of other persons any amount not recorded in the books of account.
Exemptions:-
Following
assets will be exempted from being included in the computation of net wealth
chargeable to tax:-
- One house(at the option of the assessee where he owns more than one house) or part of the house belonging to the assessee
Net wealth to include certain assets (section 4)
In
computing net wealth in the hands of an assessee as on the valuation date,
following assets inter alia will also be included in the his hands:-
- assets held by spouse of such assessee to whom such assets have been transferred whether directly or indirectly otherwise than for adequate consideration or with an agreement to live apart.
- Assets held by a minor child(not being disable child)
Computation of wealth tax
Section
3(1) lays down that wealth tax shall be computed for every assessment year.
Such wealth tax shall be computed on the net (of liabilities) wealth in excess
of Rs. 30 lacs at the rate of 1% of such net wealth.
As
wealth tax accounts for less than 0.25% of total direct taxes and is minuscule in
the total revenue collection.(Last year, it contributed Rs 866 crore to the
total revenue collection of Rs 1,038,036 crore). This may be one of the reasons
why this tax is not taken very seriously by taxpayers & department alike because
the Central Board of Direct Taxes is busy with other, more important, ones,
such as corporate tax, income tax,
service tax and excise.
However there is a stiff penalty for
evading wealth tax. Incorrect declaration of wealth can invite a fine of up to
500% of the evaded tax.