Wealth tax act,1957.bose


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Wealth tax act,1957.bose

  1. 1. WEALTH TAX ACT, 1957ByShankar BoseInspector of Income-taxMSTU, Puri
  2. 2. Return Of Wealth Sec 14 : filing of wealth Tax Return A belated or revised return at any time before the expiry of one year from the end of therelevant assessment year or before the completion of assessment, whichever is earlier. Charge Of Tax Wealth tax is charged on the net wealth of the following type of assessee. Individual HUF Company However Sec.45 excludes the following from the charge of wealth tax: Any company registered under section 25 of the Companies Act 1956. Any Co-operative Society Any Social club Any political party Any mutual fund specified u/s 10(23D) of the IT Act. Individuals Individual includes members of AOP where members’ shares are determinate. HUF includes Sikh and Jain families. What Is An Asset Sec 2(e)-Upto AY 92-93 Sec 2(ea)- from 93-94 Earlier it was property of all description with few exceptions Now only some specified assets What Is An Asset [Section 2(ea)] Any building or land appurtenant thereto Whether used for residential or commercialPurpose / guest house / firm house. Jewellery, bullion & furniture, utensils or any other article made wholly & partly of gold, silver,platinum or any other precious metal. Except stock in trade. Yachts, boats & aircraft(Not asset when used for commercial purpose). Urban land. Motor cars (other than stock in trade or used for running on hire). Cash in hand House Property used for residential or commercial purposes or maintained as a guest houseand includes a farm housesituated within 25 kms from the local limits of a municipality, corporation or cantonment board butdoes not include :- House Property- exceptions
  3. 3.  1. HP exclusively for residential purposes House Property- exceptions 2.. Any house allotted by a company exclusively for residential purposes to its employee,/officer /or a whole time director having gross annual salary of less than 5 lakhs. House Property- exceptions 3.. Any residential house or commercial house held as stock in trade. House Property- exceptions 4. Any house occupied by the assessee for his own business or profession. House Property- exceptions 5. Any residential house let out for a period of 300 days or more during the P.Yr. House Property- exceptions6. commercial complex. Urban Land population 10000 or more Urban Land Within 8 kilometres of municipality areas . Urban Land Folowing lands are not Urban Land and hence not wealths : Where- Construction is not permissible under law Unused land held for industrial purposes for more than 2 yrs Held as stock in trade for > 10 yrs Cash in hand For individual or HUF- in excess of 50000 For other persons any amount not recorded in books Deemed Assets(Sec 4) Assets transferred from one spouse to another spouse without adequate consideration /agreement of living apart. Asset held by minor child, Asset transferred by an individual to sons wife or sons minor child ( + step child ), Asset transferred to a person or AOP for the benefit of Son’s Wife, House allotted under scheme from a co-operative housing society when assessee is member When possession of building etc. is taken under part performance of contract u/s 53A ofT.P.Act. Assets exempt from wealth tax( sec 5 ) Property held under a trust The interest of an assessee in the property of an HUF Any one building in the occupation of a former ruler- under some conditions (If GOI declaresit Official Residence ) Jewellery in possession of a ruler- under some conditions ( If kept in India /sameshape/inspection.)
  4. 4.  Assets acquired from foreign money by persons of Indian origin who ordinarily lived abroad-now settlesin india- exempt for seven years One house ,or part of the house, or a plot of land comprising an area of 500 sqmts or less. (belonging to an individual or an HUF) Exclusion of assets and debts outside India- Sec 6STATUS R & OR R but NOR & N.R.Individual (Indian Citizen) HUF &CO.All assets - all debts whereverlocatedIndian assets - Indian debtsIndividual (Foreign citizen) Indian assets - Indian debts Indian assets - Indian debts Net Wealth According to sec 2(m), net wealth means Aggregate value of all assets belonging to the assesseon the valuation date,(MINUS )aggregate value of all the debts owed by the assessee on the valuation date. The debt must be incurred in connection with procurement of the asset. Steps for charging Wealth tax Ascertain “Assets” Ascertain “Deemed Assets” Consider “Exempt Assets” Value assets as per “Schedule III” Computation of Wealth Tax Valuation Date, Section 2(q) It is the last day of the previous year for income tax assessment. Tax Rate, Section 3 at the rate of 1% of the amount by which the net wealth exceeds Rs. 30lakhs. Valuation of assets(Sch-III) Valuation of immovable property - Part B Assets of business - Part D Interest in firm/AOP - Part E Jewellery – Part G Valuation in other cases – Part H Immovable property steps
  5. 5.  Step I – Gross Maintainable Rent Step II – Net Maintainable Rent Step III – Capitalise NMR Step IV – Add Premium Step V – Deduct unearned increment Gross Maintainable Rent When let out –( 1)Annual rent recd/recble or( 2 ) municipal rent valuation-Whichever is higher Gross Maintainable Rent When not let out –( 1 ) Local Authority valuation, or(2) when outside such Local Authority jurisdiction – Fair Rent Gross Maintainable Rent Add municipal tax if borne by tenant, Add 1/9thof actual rent if repair done by tenant, Add 15% interest if deposit taken from tenant(not to charge for upto 3 month’s advance rent) . Net Maintainable Rent( step -2) From Gross Maintainable Rent deduct the following : Taxes levied by local auth- whether paid or not 15% of GMR Capitalise NMR( Step -3) The NMR is to be multiplied by- 12.5 if the land is freehold 10 if the land is on lease for 50 years or more (unexpired period) 8 if the land is on lease for a period below 50 years(unexpired period) Add Premium: (Step - 4)The excess of unbuilt area over specified area PremiumNot more than 5% of aggregate area NIL5-10 % of aggregate area 20 % of capitalised ( NMR) value10-15 % of aggregate area 30%15-20 % of aggregate area 40%More than 20% of aggregate area Rule 3 not to apply, Rule 20 applies instead
  6. 6.  Specified Area :( 1 ) 60 % of Aggregate Area ( Kol, Del , Chennai., Mumbai( 2 ) 65 % for Ahmedabad Bangalore etc( 3 ) 70 % for other cities. Step V – Deduct unearned increment In case of Govt lease of land, there may be condition for payment of unearned increase fortransfer of the property. 2011] 12 taxmann.com499(Delhi)HIGH COURT OF DELHICommissioner of Income-tax, Delhi-IXVs. Monoflex India (P.) Ltd.* Numerical Example : When valuation to be done by Rule 20 of Sch III Not practicable(with approval of JCIT) Difference between unbuilt area and specified area exceed 20% Lease expires within 15 years and no clause to renew Valuation of jewellery- Rule 18, Sch-III It is estimated to be the price that it would fetch if sold in open market on valuation date With the return A statement in prescribed form will be furnished when value does not exceed 5 lakh Report of registered valuer to be given when value exceed 5 lakh Valuation of jewellery- Rule 18, Sch-III When AO is of the opinion that value so declared by assessee is less than FMV by 33 1/3% or50000/- When AO is of the opinion that value arrived at by Regd. Valuer is less than FMV He will refer the case to Valuation Officer Value so decided will be adopted for four years Circular No 646 dated 15.3.1993 Business Asset- Rule 14 Sch III Step-I – Determine value as per B Sheet (Depreciable assets- WDV, others Book Value) Step-II – Add 20% to such valuation Step-III – Find out individual valuation as per Sch III If Step III is more than step II take step III Otherwise take step I Valuation of interest in firm/AOP Rules 15,16 Sch-III Step I – Determine asset value without giving effect to sec 5 Step II – Say this value is Rs 20 and say total capital of partners/members is Rs 8 in the ratio2:3:3. Then Rs 8 out of 20 will be distributed in the ratio 2:3:3 and balance 12 will be distributedin the asset sharing ratio on desolution Step III – Individual assets are valued as usual and exemption is allowed even the asset pertainsto the firm/AOP Assessment - Intimation
  7. 7.  Sec. 16(1): Where is return has been made either u/s 14 or 15 or in response to a noticeu/s 16(4)(i). (i) if any tax or interest is found due on the basis of such return after adjustment of prepaidtaxes an intimation shall be sent to assessee specifying the amount so payable and suchintimation shall be deemed to be notice of demand u/s 30. (ii) if any refund is found due on the basis of such return the refund shall be granted to theassessee and an intimation to this effect shall be sent to the assessee. In case no sum is payable nor any refund is due the acknowledgment of the return willbe deemed to be intimation. No intimation can be sent after the expiry of two years from the end of the relevantA.Yr. Scrutiny Notice Sec. 16(2): Where a return has been made either u/s 14 or 15 or in response to a noticeu/s 16(4)(i), the A.O. If he considers it necessary or expedient to ensure that the assessee hasnot understated his net wealth, may serve on the assessee a notice requiring him to attend ona specified date and to produce or cause to be produced such evidence on which the assesseemay rely in support of his return. Scrutiny order Sec. 16(3): then after hearing the evidences as the assessee may produce and such otherindences the A.O. may require the assessee to produce and taking into account all relevantmaterials which the A.O. has gathered, the A.O shall by order in writing assess the net wealthof the assessee and determine the sum payable by him. Wealth Escaping Assessment, Section 17 If the assessing officer has reason to believe that the net wealth of any person has escapedassessment for any assessment year, he may be subjected to the provisions of the act serve onsuch person a notice requiring him to furnish within such period as specified in the notice, areturn in the prescribed form and prescribed manner setting forth the net wealth of such personis assessable as on the valuation date mentioned in the notice. No action shall be taken under this sec after the expiry of 4 years from the end of the relevantassessment year. Time Limit For Completion Of Assessment Or Reassessment, Sec 17A No order of assessment shall be made at any time after the expiry of 2 years from the end of theassessment year in which the net wealth was first assessable. No order of assessment or reassessment shall be made under sec 17 after the expiry of one yearfrom the end of the financial year in which the notice under sec 17(1) was served. Reference to Valuation Officer Audit check points Most of the Audit objections originates from Income tax assessments Assets in IT records to be closely watched Rent incomes are to be specially considered Exemption for one house- not to be given to companies Valuation Done under section 55A of IT