Wealth Tax in India
What is Wealth Tax - The Wealth Tax Act 1957 is governed by the Income Tax department that falls under the Department of Revenue. Just like Income Tax, Wealth Tax forms a part of annual assessment. It is a type of direct tax that is levied on individuals that fall under its purview.
This is a tax that is charged on the net wealth of those who fall under its purview. The benefits that you derive from ownership of property are taxed under this head. Other assets that come under the purview of wealth tax are motor car, aircrafts, yachts, cash in hand, jewellery etc. You are required to pay wealth tax on yearly basis on the market value of your property irrespective of the fact that it generates any income for you or not.
Wealth Tax is Applicable To:
- Individuals
- Companies
- Hindu Undivided Families (HUFs)
The Wealth Tax as of now is 1 percent on the net taxable wealth of the assessee that exceeds the limit of Rs 30 Lacs.
Assets that are charged under Wealth Tax in India
- House Property (Guest House, residential house or commercial)
- Urban Land
- Boats, Aircrafts and Yachts
- Motor Car
- Cash in Hand (subject to certain limits) only for HUFs and Individuals
- Jewellery, Gold Utensils, Silver, Bullions etc
- All assets that are transferred by individuals to their minor children and to spouse for considerations that are inadequate also fall under the purview of wealth tax.
Commodities not Included in Assets
- Property that has been established in nature of commercial complex
- If any of the above mentioned assets are held as Stock-in-Trade will not fall under the purview of wealth tax.
- Gold deposit bonds.
- Any house that has been on rent for more than 300 days in a year
- Any house that has been held for the purpose of business or profession.
- Residence that is allotted to an employee by company, or an Officer or a Whole Time Director (subject of conditions).
Assets Exempted from Wealth Tax in India
- Assets that belong to Indian repatriates
- Productive Assets like investment in UTI, debentures, mutual funds, shares etc are exempt from wealth tax.
- Property that is held by Trust.
- Any Social Club
- A mutual fund specified under section 10(23D)
- Any one house or a plot of land or a part of any house that does not extend 500sq.mts for HUF and individual assessee.
- Any interest that belongs to the assessee in the coparcenary property of HUF but he/she should be the member of the same.
- Any residential property of a former ruler.
The residential status of the assessee plays an important role in assessing their share of wealth tax similar to the way it does while computing the Income Tax every year. For the residents of India, all assets owned by them within the country and abroad would form a part of net taxable wealth whereas in case of Non-Resident Indians, the assets that are owned by them only in India qualify for the net taxable wealth.
Challan ITNS 282 is to be used in order to pay your Wealth Tax before you go forth for filling wealth tax returns. Non-payment or late payment of wealth tax attracts heavy penalty.
Penalty for Late Payment of Wealth Tax
Late payment of wealth tax would lead you to a penalty of 1 percent interest per month for every month of delay.
Non-Payment of Wealth Tax
Non-Payment of wealth tax or evasion of the same could lead to a tax recovery process that may see levying of five times of the tax that was actually due. In the event of extreme cases the defaulter may also be imprisoned.
Wealth Tax in India - Changes Suggested in Direct Tax Code
Following are few changes that have been suggested in direct tax code. These changes may aid in bringing new reforms in wealth tax rates and calculations. Let’s have a look –
- The threshold limit for wealth tax may witness a rise from Rs 30 Lac to Rs 50 Crores.
- Fixed deposits, shares, mutual funds, corporate bonds, debentures etc may fall under the purview of wealth tax. These assets may get to be valued at market price or at their actual cost, whichever is lower.
- The wealth tax rate may witness a change from 1 percent to 0.25 percent.
It is our moral responsibility to pay our taxes timely and diligently. We all remain very cautious about the Income Tax liability that gets accrued on us every year.
Similarly, wealth tax, which is a less renowned sibling of Income Tax, is also a form of tax for which we need to follow the same diligence and cautiousness. It is important to note that wealth tax is levied over and above Income Tax. We should not remain ignorant when it comes to paying wealth tax on assets possessed by us and should not only pay the wealth tax on time but should also file wealth tax returns on time.
Contributed By: Megha Sharma |
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Megha Sharma works as a guest lecturer in Delhi. She holds an MBA & Doctorate from the UPTU. With extensive knowledge and experience in various financial products, she also works as a consultant in banking & finance domains wherein she offers advice to her clients in managing personal finance. | |
How to consider this for wealth tax and total value 50lacs.