MBA 3rd semester FM02

1. WEALTH TAX

2. Applicability of Wealth Tax
 Persons covered under Wealth Tax
 An individual and
 Hindu Undivided Family (HUF) and
 a company
 Note-Trust in assessable as an Individual and thus liable to pay Wealth Tax
 Persons not covered under Wealth tax
 Co-operative Society,
 Companies register u/s 25 of companies Act
 Social club
 Political parties ,
 RBI,
 Mutual Fund registered under section 10(23D) of Income Tax Act.
 Exemption Limit
 Person whose net wealth on the valuation date (i.e. 31st March) up to Rs
30,00,000 (wef Ay 2010-11) is liable for Wealth Tax

3. Rate of Wealth Tax & Valuation Date
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 Wealth Tax is levied @1% on net wealth in excess
of Rs 30,00,000.
 No cess or surcharge is levied on Wealth Tax.
 Valuation date is March 31 immediately preceding
the Assessment year.
 Net wealth means excess of assets over debts
 Assets includes deemed assets
 Assets do not includes exempted assets

4. Net Wealth shall be computed as
under-
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 Aggregate value of all assets wherever located
belonging to the assessee on the valuation date
 Add :-Deemed Assets
 Less:-Exempted Assets
 Less:-Debts owed by the assessee on the valuation
date which have been incurred in his Net Wealth.

5. Wealth Tax and residential status
 A resident and ordinarily resident individual who is an
Indian citizen, a resident and ordinarily resident HUF and
every resident company is liable to Wealth Tax in respect of
world assets (i.e. assets located in India as well as outside
India).
 However, an individual who is not a citizen of India (may be
resident and ordinarily resident or not), a resident but not
ordinarily resident individual/HUF and every non-resident
(may be individual or HUF or company) is liable to Wealth
Tax only in respect of assets located in India
 Residential status of every person will be ascertained in the
same manner as is determined under Income Tax Act.

6. Assets covered under Wealth Tax
(Movable Property)
 Motor cars whether Indian or Imported(other than
those used by the assessee in the business of running
them on hire or used by the assessee as stock-in-trade).
 Yachts, boats and aircrafts (other than those used by
the assessee for commercial purposes).
 Jewellery, bullion, furniture, utensils or any other article
made wholly or partly of gold, silver, platinum or any
other precious metal or any alloy containing one or
more precious metals (other than used by the assessee
as stock-in-trade)

7. Assets covered under Wealth Tax
(Immovable Property)
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 Any building or land appurtenant thereto whether used for-
 Residential purposes.
 Commercial Purposes
 For the purpose of maintaining a Guest House,
 Otherwise.
House shall include a farm house situated within 25 kms of a
Municipality .excluding
 Any residential property which has been let-out for a minimum
period of 300 days in the previous year.
 Any house occupied by the assessee for the purposes of any
business or profession carried on by him.
 Commercial establishments or complexes.

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 A house meant exclusively for residential purposes and which is
allotted by a company to an employee or an officer or a director
who is in whole-time employment, having a gross annual salary
of less than Rs 10,00,000.
 Any house for residential or commercial purposes which forms
part of Stock in trade.

9. Assets covered under Wealth Tax
(Immovable Property cont…)
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 Urban land, other than the following
 Land on which construction is not permissible under any law
for the time being in force; or
 Any land on which construction is done with the approval of
the appropriate authority; or
 Any unused land held by the assessee for industrial
purposes; it will be excluded for a period of two years from
the date of its acquisition by him; or
 Any land held by the assessee as stock-in-trade; it will be
excluded for a period of ten years from the date of
acquisition by him

10. Assets covered under Wealth Tax
Cash in Hand
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 In case of an individual and HUF :
 Cash in hand in excess of Rs 50,000
 In the case of a company :
 any amount not recorded in the books of account.

11. Deemed ownership in respect of assets
transferred without consideration
 A person will be treated as deemed owner in
respect of assets transferred by him/her (without
adequate consideration)
 to spouse(Except where transfer is in connection with an
agreement to live apart) or
 To son's wife or
 to a person for his/her benefit or for the benefit of his/
her spouse or for the benefit of his/ her son's wife.

12. Taxability of assets belonging to minor child
 Assets belonging to a minor child will be clubbed along
with the net wealth of his/ her parent.
 No clubbing will be done in respect of assets
belonging to a minor child suffering from any disability
specified under section 8oU of the Income Tax Act.
 Further, clubbing provisions will not apply in respect of
any asset acquired by the minor out of income arising
to the child by application of his/her skill, talent or
specialized knowledge and experience, etc.

13. Taxability of assets belonging to partnership firm
 A partnership firm is not liable to Wealth Tax.
 However, value of taxable asset of the firm is to
be computed in the prescribed manner and the
share of each partner in the assets of the firm will
be included along with the net wealth of each
partner.

14. Assets exempt from Wealth Tax
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 A person can claim exemption in respect of few assets.
 Exemption in respect of one house or part of a house or a
plot of land (not exceeding 500 Sq. Mtrs.) available to
individuals and HUFs.
 Any property held under trust or other legal obligation for
any public purposes of a charitable or religious nature in
India
 Any one building in occupation of a Ruler, being a building
which was declared as his official residence by the Central
Government.
 Heirloom Jewellery in the possession of any ruler.

15.  In case of an Assessee , being a person of Indian Origin or
a citizen of India, who was ordinarily residing in a foreign
country and who has returned to India with the intention of
permanently residing therein,
 Then the moneys and the value of assets brought by him into
India and
 The value of assets acquired by him out of moneys sent from
abroad and from NRE account
 Within 1 year immediately preceding the date of his return
to India
 Shall be exempt for a period of 7 Successive Assessment
years commencing from the AY in which he returned to India.

16. Debt in respect of taxable assets
 Debts owed by the assessee on the valuation date
are deductible if---
 These debts are incurred on the assets included in
the wealth.

17.  Mr. Gupta has the following assets and liabilities on the
 valuation date:
 1. Residential House 40,00,000
 2 .Cars for personal use 10,00,000
 3 .Jewellery 16,00,000
 4 .Aircrafts and boats for personal use 1,30,00,000
 5 .Farm house 15 Kms away from local limits of Mumbai 12,00,000
 6 .Cash in hand 2,20,000
 7 .Shops given on rent 12,00,000
 8 .Loan taken to purchase aircrafts 50,00,000
 9 .Loan taken to purchase residential house 22,00,000

 Compute Net Wealth and Wealth Tax?

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 1 Residential House (exempt u/s 5 (vi) ) -
 2 Cars for personal use 10,00,000
 3 Jewellery 16,00,000
 4 Aircrafts and boats for personal use 1,30,00,000
 5 Farm house 15 Kms away from local limits of Mumbai
12,00,000
 6 Cash in hand ( In excess of Rs. 50,000 is an asset) 1,70,000
 7 Shops given on rent ( Commercial establishment not an
 asset u/s 2 (ea) )
Less - Loan taken to purchase aircrafts (50,00,000)
 Loan taken to purchase residential house ( Not deductible since
residential house is exempt)
 Net Wealth 1,19,70,000

19. Return of wealth
 Every individual, HUF and company whose net
wealth on valuation date (i.e. 31" March) exceeds
30,00,000 shall file the return of Wealth Tax.
 The due dates for filing the return of Wealth Tax
are same as due dates for filing the Return of
Income specified under section 139 of Income Tax
Act (i.e. if assessee is liable to audit, due date will
be 30th September and in other case the due date
will be 31st July).

20. Belated or revised return
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 A belated return or revised return can be filed
within a period of one year from the end of the
assessment year or before completion of
assessment, whichever is earlier.
 Interest @ 1% per month or part of the month is
levied for delay in filing the return of Wealth Tax.

21. Major penalties
 Penalty up to 100% of the amount of tax in arrears
can be levied in case of non-payment of Wealth
Tax.
 Penalty in case of concealment of wealth can be up
to 500% of tax sought to be avoided.

22. CURRENT STATUS
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 Wealth tax no longer leviable from assessment year
2016-17.
 Taxpayers are, therefore, not required to file a wealth
tax return from assessment year 2016-17 onwards.
 Individuals and HUFs with income above a specified limit,
filing returns in ITR-3 and ITR-4 are already required to
furnish information of their assets and liabilities in their
annual return of income.
 With assessment year 2016-17, individuals and HUFs
filing their returns of income in ITR-1, ITR-2, ITR-2A and
ITR-4S, having income exceeding Rs 50 lakh will now be
required to furnish information regarding assets and
liabilities in schedule-AL of the relevant ITR form.

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