1. Wealth Tax
By
Shankar Bose
Inspector of Income-tax
MSTU, Puri

2. INTRODUCTION
Wealth Tax is a tax on the value of wealth owned by a person, levied under the Wealth Tax Act,1957.
It is one of the direct taxes.
It is annual tax. It is charged for every assessment year commencing from 1st April, 1957.
The tax is levied @ 1 per cent on the amount of wealth as on 31st March of every year, where such
amount exceeds Rs.30,00,000.
LEGAL FRAMEWORK
Wealth tax is charged under the provisions of WEALTH TAX ACT,1957 read with WEALTH TAX RULES,
1957
WEALTH TAX ACT, 1957
THIS Act came in to force with effect from 1st April, 1957.
This Act extends to the whole of India.
This Act is divided into 8 chapters and contains 119 (in numbers) sections and 3 Schedules.
This Act has detailed provisions regarding levy and collection of wealth tax.
CHARGING OF WEALTH TAX
Section 3 of wealth Tax Act, 1957 provides that every:
Individual,
HUF or
Company,
who is an assessee shall be charged wealth tax @1% on the amount by which his net wealth,
determined on the basis of nationality and residential status, on the relevant valuation date, exceeds Rs.
30,00,000.
WHO ARE NOT SUBJECT TO WEALTH TAX?
Section 45 of Wealth Tax Act provides that no wealth tax shall be levied in respect of the net wealth of
the following persons:
Section 25 company
Any co-operative society
Any social club
Any political party
A mutual fund specified u/s10 (23D) of the Income tax Act.
ASSET [sec. 2(ea)]
The term Assets has been defined under section 2(ea) of wealth Tax Act, 1957.
This definition covers only 6 types of assets, basically these are unproductive in nature.
It is to be noted that for the purpose of charging wealth tax “ there must be an asset with in the
meaning of sec.[2(ea)]
ASSETS
1. House
2. Motor Car
3. Jewellery, Bullion, etc.,
4. Yachts, boats and aircrafts,
5. Urban Land,
6. Cash in Hand,
DEEMED ASSETS
Asset transferred to spouse, Section 4(1)(a)(i).
Asset held by minor child, Section 4(1)(a)(ii).
Asset transferred to a person or AOP, Section 4(1)(a)(iii).
Asset transferred under revocable trust, Section 4(1)(a)(iv)
Asset transferred by an individual to sons wife or sons minor child including step child, Section 4(1)(a)(v)

3. Asset transferred by an individual for the benefit of sons wife, Section 4(1)(a)(vi)
Interest in the asset of the firm, Section 4(1)(b).
Cont…
Converted property, Section 4(ia).
Transfer by means of entries in the book, section 4(5a)
Impartible assets section 4(6)
House from a co-operative housing society section 4(7)
ASSETS EXEMPT FROM WEALTH TAX
Property held under a trust
The interest of an assessee in the coparcenaries property of an HUF
Any one building in the occupation of a former ruler of a princely state which has been declared by the
central government as his official residence immediately after the commencement of the constitution
act 1971.
Jeweler in possession of a ruler which has been recognized before the commencement of the wealth tax
act.
One house or part of the house belonging to an individual or an HUF or a plot of land comprising an area
of 500 sqmts or less.
DEBT
Debts owed are interpretable to mean the liability to pay a certain amount of money either in present or
in future.
It is an obligation to pay a liquidated or certain sum of money.
It is not the point of time of payment that determines whether the claim or demand is a debt.
There must be an actual debt owing on the valuation date.
NET WEALTH
According to sec 2(m), net wealth means the amount by which the aggregate value of all assets
wherever located belonging to the assesse on the valuation date, is in excess of the aggregate value of
all the debts owed by the assessee on the valuation date.
VALUATION DATE
A very important date in the wealth tax.
All the assets held by the assessee on that day are counted for the purpose of wealth tax.
31 March preceding the relevant assessment year is the valuation date.
RETURN OF WEALTH
Sec 14 deals with the filing of return of wealth.
It is statutorily obligatory for every person to file the return if his net wealth exceeds maximum amount
which is chargeable to wealth tax.
He can file a belated or revised return at any time before the expiry of one year from the end of the
relevant assessment year or before the completion of assessment, whichever is earlier.
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