Wealth tax

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Description on applicability of Indian Wealth tax

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Wealth tax

  1. 1. WEALTH-TAX CA Paras Savla05-05-2013 BORIVALI CENTRAL STUDY CIRCLE OF WIRC OF ICAI
  2. 2. Does wealth-tax has relevance? 2 Paras Savla Wealth-tax 5/5/2013
  3. 3. Does wealth-tax has relevance? 3 Paras Savla Wealth-tax 5/5/2013
  4. 4. Does wealth-tax has relevance? 4 Paras Savla Wealth-tax 5/5/2013
  5. 5. Legal background  Wealth-tax Act, 1957  Eight chapters  47 main sections  Three Schedules  Wealth-tax Rules, 1957  13 main rules  Various forms  Act extents to whole of India 5 Paras Savla Wealth-tax 5/5/2013
  6. 6. Wealth-tax on whom  Persons not liable for wealth-tax  Company Registered S. 25  Co-op Society  Social Club & Incorporated Club – Willingdon Sports Club v. WTO (1982) 137 ITR 83 (Bom)  Political Party  Mutual Fund  RBI  AOP (Shares are determinate)  Local Authority  AJP  Public or religious Charitable trust 6 Paras Savla Wealth-tax 5/5/2013
  7. 7. Wealth-tax on whom (Cont.)  Wealth is payable by  Individual  HUF  Company  Partners of Firm or members of AOP on their respective share in net wealth of firm/AOP  AOP – Shares of whom are indeterminate or unknown  Trust – if trust diverts its income as referred in S. 21A 7 Paras Savla Wealth-tax 5/5/2013
  8. 8. Valuation date  Last date of the previous year ie 31st March of every previous year  31st March 2013 for AY 2013-14  Net wealth on last movement of last date should be assessed and not the net wealth at the first movement of the last date – Banarasi Das v CWT (1970) 76 ITR 104 (All); Dwarkanath v. WTO (1982) 137 ITR 83 (Bom) 8 Paras Savla Wealth-tax 5/5/2013
  9. 9. Valuation date - case  Mr M’s cash of Rs. 0.5 crs was seize and Gold of Rs. 1 cr was confiscated by Government authorities on 31-3-2013  What is taxability? 9 Paras Savla Wealth-tax 5/5/2013
  10. 10. Compliance  Rate of wealth tax – 1% on assets exceeding Rs. 30,00,000  No Surcharge & Education cess is payable  Due date of return of wealth is due date of filing return of income  Return Forms  Form A – Individual & HUF  Form B – Company 10 Paras Savla Wealth-tax 5/5/2013
  11. 11. Wealth-tax on what Productive Assets Generates Active Income No wealth Tax Non-productive Assets Generates no income / passive income Wealth– tax W E A L T H 11 Paras Savla Wealth-tax 5/5/2013
  12. 12. What is wealth Wealth S. 2(ea) Building & Land Motor Car Jwellery Yatchs Boats Aircrafts Urban Land Cash >50K (Individual) 12 Paras Savla Wealth-tax 5/5/2013
  13. 13. Building & Land appurtenant  Any building or land appurtenant thereto (house), whether used for residential or commercial purposes or otherwise such as farm house situated within 25 km from local limits of any municipality or a cantonment board 13 Paras Savla Wealth-tax 5/5/2013
  14. 14. Building & Land appurtenant-Cont.  Scope excludes  House meant exclusive for residential purpose & allotted by a Company to an employee or an officer or a director who is in whole- time employment, having gross annual salary lf less than Rs. 10,00,000 (w.e.f. AY 2013-14), Rs. 5,00,000 (up AY 2012-13)  House for commercial / residential purpose held as stock-in-trade  Any house occupied for the purposes of the business / profession of assessee  Any house property that is let out for minimum period of 300 days in previous year  Any property in the nature of commercial establishment or complexes 14 Paras Savla Wealth-tax 5/5/2013
  15. 15. House – Case 1  Assessee is a professional owning 2 flats in residential building  One used for his residence and another used for meeting  One flat used for residence exempt u/s 5(vi)  Another flat since used for purpose of business or profession is not an asset  Issue – Depreciation – Short term capital gains 15 Paras Savla Wealth-tax 5/5/2013
  16. 16. House – Case 2  Assessee owning house  Occupied for his business for 100  Rented 265 days  What would be taxability? 16 Paras Savla Wealth-tax 5/5/2013
  17. 17. House – Case 3  Assessee individual owning factory building  Granted an lease to the company in which he is director or shareholder / firm in which he is partner  Market rent was charged  What is the taxability?  Whether it is an asset 2(ea)(1)(3)/(4)/(5)?  Whether exemption can be claimed u/s 5(vi)? 17 Paras Savla Wealth-tax 5/5/2013
  18. 18. House – Case 4  Assessee individual owns residential accommodation  It has granted rent free accommodation to its employees earning annual salary of Rs. 200,000  Whether it is a wealth? 18 Paras Savla Wealth-tax 5/5/2013
  19. 19. House – Case 5  Housing limited is in business of construction. During the year it has constructed residential building ‘A’, intend to sell, residential building ‘B’, intends to give on rent and Commercial Complex also intent to be given on rent.  Unsold flats in building ‘A’ were let on rent on 30 Sep 2012 and few on 2 Feb 2013  Flats in building ‘B’ were given on rent to an Multinational company 15 Jan 2013  Commercial Complex was ready for giving on rent on 31-1- 2013, but no licensee were available  Whether these are asset for wealth-tax? 19 Paras Savla Wealth-tax 5/5/2013
  20. 20. House – Case 6  M Limited engaged in services of electronics is holding shop in a building. Building comprises of 2 shops and 25 flats.  Shop has been given on rent on 5 May 2012  Whether it is taxable to wealth-tax? 20 Paras Savla Wealth-tax 5/5/2013
  21. 21. Motor Car  Motor car other than used by the assessee in the business of running them on hire or as stock in trade  Motor Car includes  Jeep  Sport Utility Vehicle (SUV)  Multi Utility Vehicles (MUV)  Motor car excludes  Buses  Trucks  Tempo etc 21 Paras Savla Wealth-tax 5/5/2013
  22. 22. Motor car – Case 1  Cer Leasing Limited is in business of car leasing.  As on 31 March 2013 it owns 100 cars which are given in lease  Whether it would be assets?  Would answer be different in case motor vehical is given on hire purchase? 22 Paras Savla Wealth-tax 5/5/2013
  23. 23. Jewellery  Jewellery includes ornaments made of  Gold  Silver  Platinum or  Any precious metal or any alloy containing one or more of such precious metals  Precious or semi-precious stones whether or not set in any furniture, utensils or other article or worked or woven into any wearing apparel  Bullion  Furniture, utensils or any other article made wholly or partly of above 23 Paras Savla Wealth-tax 5/5/2013
  24. 24. Yatchs, Boats, aircrafts  Yatchs, Boats and aircrafts (other than those used by the assessee for commercial purposes).  What commercial purposes means?  Whether ships & vessels covered?  Motor car v/s aircrafts 24 Paras Savla Wealth-tax 5/5/2013
  25. 25. Urban land Up to from Ay 2013-14 Urban land means land situate :  in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population of not less than 10,000 or  In any distance measured - Not more than 8 km from the limits of local authority and has been notified by Central Government 25 Paras Savla Wealth-tax 5/5/2013
  26. 26. Urban land (Contd.) W.e.f. from Ay 2014-15 (as per Finance Bill 2013) Urban land means land situate —  in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population of not less than 10,000 or  In any distance measured aerially  Not more than 2 km from the limits of local authority and has a population between 10,000 and 1,00,000  Not more than 6 km from the limits of local authority and has a population between 1,00,000 and 10,00,00  Not more than 8 km from the limits of local authority and has a population exceeding 10,00,000 26 Paras Savla Wealth-tax 5/5/2013
  27. 27. Urban land (Contd.)  It excludes –  land classified as agricultural land in the records of the Government and used for agricultural purposes (as per Finance Bill 2013) or  land on which construction of a building is not permissible under any law for the time being in force in the area in which such land is situated  the land occupied by any building which has been constructed with the approval of the appropriate authority  any unused land held by the assessee for industrial purposes for a period of two years from the date of its acquisition  any land held by the assessee as stock-in-trade for a period of ten years from the date of its acquisition 27 Paras Savla Wealth-tax 5/5/2013
  28. 28. Urban Land – Case 1  M Industries Ltd. has purchased land for construction of factory building on 1-4-2007  Necessary permission for constructions were granted on 1- 1-2010  Construction of factory building commenced on 1-4-2012  What is wealth-tax liability? 28 Paras Savla Wealth-tax 5/5/2013
  29. 29. Urban Land – Case 2  C Builders Ltd has acquired land for construction on 1-4- 2002  Property was in litigation and permission could not be obtained in time  Necessary permission were granted on 1-4-2012  Development of property began on 10-4-2012  What is wealth-tax liability? 29 Paras Savla Wealth-tax 5/5/2013
  30. 30. Cash  In case of individual & HUF cash exceeding Rs. 50,000 to be included in assets  In case of other persons cash not recorded in books of accounts to be treated as an asset. 30 Paras Savla Wealth-tax 5/5/2013
  31. 31. Clubbing when (Deemed Assets)  Assets transferred to spouse / minor child / son’s wife for inadequate consideration  Assets transferred to person or AOP for the benefit of such person or his/her spouse or son’s wife for inadequate consideration  Assets transferred to person or AOP for inadequate consideration, under an irrevocable transfer  Property converted into family property 31 Paras Savla Wealth-tax 5/5/2013
  32. 32. Deemed Assets  Holder of impartial estate  House in a co-operative society, company, AOP  Building on lease  Retain possession of building under part performance of contract u/s 53A of TOPA, 1882  Building on lease 32 Paras Savla Wealth-tax 5/5/2013
  33. 33. Clubbing - Case 1  J transfer to his spouse  Shares on 31-3-2010  House on 31-3-2011  On 31-3-2012 Mrs J sold shares and purchased Diamonds  On 31-3-2013 Mrs J sold house ans invested money into Government Bonds 33 Paras Savla Wealth-tax 5/5/2013
  34. 34. Clubbing – Case 2  Mr P transferred house to his wife on 31-3-2001  Said house is let on rent yielding annual rent of Rs. 150,000 pa  Out of rent for past 13 years Mrs P purchases jewellery of Rs. 15,00,000  What is wealth-tax liability? 34 Paras Savla Wealth-tax 5/5/2013
  35. 35. Let’s talk? 35 Paras Savla Wealth-tax 5/5/2013
  36. 36. Thank you! 36 Paras Savla Wealth-tax 5/5/2013

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