What Is Wealth Tax In India?

The society of any country is based on a sound taxation system which oils the entire administrative machinery. The current Indian tax system has its roots in the British raj as is our constitution. The country has broadly two types of taxes – Direct and Indirect tax. While everyone knows that excise and service tax are indirect levies on our income and Income tax a direct levy, wealth tax is often forgotten.

Wealth Tax is a levy on the capital value of assets. It is levied on the following types of assets on the valuation date:
 

  • Commercial or Residential Property

 

  • Non agricultural urban land

 

  • Yachts, cars and aircrafts

 

  • Utensils, Jewellery, furniture, bullion and precious metal articles

 

  • Cash at hand in excess of a sum of rupees 50,000


However, the above assets fall within the tax net of wealth tax only if, Net wealth as on Valuation Date (31st March of the relevant F.Y.) is more than 30 lakhs rupees. The tax rate is 1% on the Net Wealth. Net wealth can be in a nut shell defined as Section 2(ea) assets plus Section 4 deemed assets reduced by Section 5 exempted assets as well as Debt pertaining to the asset incurred anywhere. It is levied on Companies, individuals and HUFs as well as other specified assessees.
 
The ownership of above mentioned assets is usually determined by legal tenet and even inheritance and gifts are included. Some assets which will not be considered for wealth tax are:
 

  • A residential house used for purposes which are residential as per the act or if such a house has been given on rent during the relevant financial year for at least 300 days.

 

  • Any asset if the same is a stock in trade for the assessee.

 

  • Properties used for commercial purposes are also not chargeable to tax.

 

  • Motor car if used by the assessee in a business of car hire are excludible.

 

  • Aircrafts, yachts and boats used for profession or business excludible. However, motor car used in business or profession is included.


Deemed assets are also chargeable to this tax. They include assets which have been transferred for a consideration which considering prudence and fairness is inadequate. Transfer maybe to a spouse (Excludes if in the course of live apart agreement), to a minor child (Clubbed to the income of the parent who has higher net wealth). NRIs that plan to return to India have been concessions. The due date for filing a wealth tax return is 31st July of the financial year that immediately succeeds the relevant valuation date.

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