2. Assignment : TAXATION LAWS
Paper No:2
Submitted By
Mahija Madhu
BA LLB
2014-19
10th Semester
Submitted To
Sheeja Mam
Asst Prof in Law
Dept of Law
Kannur University
3. INTRODUCTION
• The Wealth Tax Act, 1957 was an Act of
the Parliament of India that provides for the
levying of wealth tax on an individual, Hindu
Undivided Family (HUF) or company. The wealth
tax was levied on the net wealth owned by a
person on a valuation date, i.e., 31 March of every
year.
• Wealth tax is calculated at the rate of 0.25 percent
(1.0 percent w.e.f April 2010) of the amount of net
wealth that exceeds Rs. 50 lakh(Rs. 30 Lakh w.e.f
April 2010) on the valuation date.
4. Valuation of Assets
• Valuation of Assets [Section 7 and
schedule III]
As per section 7(1), the value of the assets,
other than cash, as on the valuation date, shall
be determine in the manner laid down in
Schedule-III of the Wealth-tax Act.
5. Valuation of a Building (Part B of
schedule III)
Value of any immovable property (being a building or
land appurtenant thereto or part thereof) is to be
made in accordance with Part B schedule III to the
Wealth Tax Act .
Steps for valuation of immovable property :
• Step 1: Compute the gross maintainable rent of the
immovable property. The gross maintainable rent in
this case will be:
– (i) The amount received or receivable by the owner as
annual rent;
– (ii) The amount value assessed by the local authority in
whose area the property is situated;
6. • Step 2 : Compute the net maintainable rent of the
immovable property : Net maintainable rent
means the amount of gross maintainable rent as
reduced by the following:
– (a)The amount of taxes levied by any local authority in
respect to the property; and
– (b) A sum equal to 15% of the gross maintainable rent.
• Step 3 : Capitalize Net maintainable rent . This can
be done by multiplying the net maintainable rent
by 12.5 . In case such property is constructed on
leasehold land ,net maintainable rent is to be
multiplies by 10 when the unexpired period of
lease of such land is 50 yrs or more
7. • Step 4 : Add premium to the capitalized value of
inbuilt area of the plot of land on which the
property is build exceeds the specified area. The
amount of premium to be added to the capitalized
value is determined as follows:
1. If the excess of unbuilt area is not more than 5% then
no premium.
2. If the excess of unbuilt area is more than 5 % but upto
10% then 20% of capitalized value as premium .
3. If the excess of unbuilt area is more than 10 % but not
more than 15 % then 30% of capitalized value as
premium.
4. If the excess of unbuilt area is more than 20 % then
40% of capitalized value as premium.
5. If the excess of unbuilt area is more than 20 % of
aggregate area , add premium as the estimated value
by valuation/Assessing officer
8. • Step 5:
• Deduct unearned increase in the value of land
from the amount arrived after adding in the
capitalised value ,the amount for unbuilt area
computed as below:-
• Specified part if the unearned increase,if any
payable to the Govt or,
• 50% of the value as arrived after adding in the
Capitalized value the amount for unbuilt area
whichever is less.
9. Valuation of self-occupied Property
Sec 7(2)
The valuation of a house or part of the house belonging
to the assessee and exclusively used by him for
residential purposes throughout the period of 12 months
immediately preceding the valuation date may , at the
option of the assessee , be taken to
1. The value determined in the manner laid down in
Schedule III as on the valuation date next following the
date on which he became the owner of the house or ;
2. On the valuation date relevant to the assessment year
commencing on April 1 ,1971
Whichever valuation date is later
10. Valuation of Assets of Business [Rule 14 of
Part D of Schedule III]
Where the assessee is carrying on a business for which
accounts are maintained by him regularly, then the value
of the assets shall be determined as follows:
(a) Where the asset are disclosed in the balance-sheet then
value shall be taken to be,
(i) In case of Depreciable assets its Written-Down Value;
(ii) In case of Non-Depreciation assets its Book Value;
(iii) In the case of closing stock its value adopted for the
purposes of assessment under the Income-tax Act for the
previous year relevant to the corresponding assessment year.
11. • Where the value of any of the assets referred to
in clause (a), determined in accordance; with the
provisions of Schedule III or with rule 20, and this
value exceeds the value arrived at in accordance
with clause
• (a) by more than 20 per cent, then the higher
value shall be taken to be the value of that asset.
• (b) Where the asset not disclosed in the balance-
sheet then value shall be determined in
accordance with the provisions of Schedule III or
as per rule 20.
12. Valuation of interest in Firm or Association
of person (Part E of Schedule III)
According to rule 15, the value of the interest
of a person in a firm of which he is a partner or
in an association of persons of which he is a
member, shall be determined in the manner
provided in rule 16, which is as follows:
• Step-1: The net wealth of the firm or
association of persons on the valuation date
shall first be determined.
13. • Step-2: The value so arrived at in step no 1 shall
be allocated the partners in accordance with the
agreement or in absence of such agreement , in
the proportion in which the partners are entitled
to share profits
• Step-3: The sum total of amounts so allocated to
a partner or member shall be treated as the
values of the interest of that partner or member
in the firm or association.
• Where the net wealth of the firm or AOP includes
the value of any assets located outside India, the
value of the interest of any partner or member in
the assets located in India shall be determined.
14. The valuation of life interest will be calculated
in following steps:
Step 1. Compute the average net annual
income derived by the assessee from the life
interest asset during each of the last 3 yrs
ending with the valuation date.
While computing net annual income expenses
incurred on the collection of such income subject
to maximum of 5% of average annual gross
income shall be deducted
Valuation of life interest
15. • Step 2 Multiply the average annual income so
arrived by 1/P+d)-1
– Average annual income×[(1/P+d)-1]
– ‘P’ represents the annual premium for a whole life
insurance without profits on the life tenant for unit
sum assured,
– ‘d’ is equal to (i/1+i),
– ‘i’ being the rate of interest which shall be 6.5%p.a.
• Where the life tenant cannot be insured at
normal premium rates but only at higher
premium rates, then the assessing officer may
vary the validation suitably
16. • The value of life-interest shall, in no case,
exceed the value as on the valuation date, as
determined under the Schedule, of the corpus
of the trust from which the life interest is
derived.
17. Valuation of jewellary (Part G of schedule III)
Valuation of jewellery shall be determined in the following manner:
1)The value of jewellary shall be estimated to be the price which it
would fetch, if sold in the open market on the valuation date.
2) The return of net wealth furnished by assessee shall be supported by
●A statement in the Form No : 0-8A shall be furnished where the value
of the jewellery on the valuation date does not exceed Rs.5 lakhs.
●A report of a registered valuer in the Form No 0-8 shall be furnished
where the value of the jewellery on the valuation date exceeds Rs.5
lakhs
3) The Assessing Officer is of the opinion that the Fair Market Value of the
jewellery exceeds the value of the jewellery declared by the assessee in
his return, he may refer the valuation of such jewellery to a Valuation
Officer) and the value of the jewellery in the such case, shall be the Fair
Market Value as estimated by the Valuation Officer.
18. Valuation of Assets in other cases (Part H
of Schedule)
• The value of any asset ,other than cash shall be
estimated either by the Assessing officer himself
or by the valuation officer .
• In both cases the value shall be estimated to be
the price which it would fetch if sold in open
market on valuation date
• If the asset is not saleable in the open market
value shall be determined in accordance with the
guidelines specified by the board from time to
time by general or special order .
19. CONCLUSION
The wealth tax was abolished in the union
Budget 2016-17 .The wealth tax was replaced
with an additional surcharge of 2 % on the
super rich with taxable income of over 1
Crore annually .The reason for the abolition
of Act was to provide simple taxation system.
20. Bibliography
• Dr S.R .Myneni , Law of Taxation ,Allahabad
law Agency ,3rd Edn ,2014
• https://shodhganga.inflibnet.ac.in/bitstream/
10603/7789/12/12_chapter%205.pdf
• https://www.caclubindia.com/forum/valuatio
n-of-assets-under-wealth-tax-act-1957-
60124.asp
