4. Persons covered under Wealth Tax
An individual and
Hindu Undivided Family (HUF) and
a company
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
5. 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
6. 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.
7. ASSETS COVERED UNDER WEALTH TAX
(MOVABLE PROPERTY)
Motor cars (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)
8. ASSETS COVERED UNDER WEALTH TAX
(IMMOVABLE PROPERTY)
Any building or land appurtenant thereto (including a farm
house) situated within 25 kms of a Municipality or
Cantonment Board, 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.
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
9. ASSETS COVERED UNDER WEALTH TAX
(IMMOVABLE PROPERTY CONT…)
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
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 his/her HUF or
to his/ her spouse or
to his/ her 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 80U 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
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.
15. DEBT IN RESPECT OF TAXABLE ASSETS
From the total value of taxable assets the value of
debt owed in respect of taxable assets is to be
deducted to arrive at the value of net taxable
assets.
16. 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 30"‘
September and in other case the due date will be
31 "July).
17. BELATED OR REVISED RETURN
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.
18. 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.
20. THE WEALTH TAX ACT , 1957
DEFINITIONS
The amount by which the
aggregate value computed
in accordance with the
provisions of this Act of. all
the assets, wherever
located, belonging to the
assessee on the valuation
date, including the assets
required to be included in
his net wealth as on that
date under this Act, is in
excess of the aggregate
value of all the debts owed
by the assessee.
Every person in respect of
whom any proceeding under
Wealth tax act has been
taken for the determination of
wealth-tax payable by him or
by any other person or the
amount of refund due to him
or such other person
Every person who is deemed
to be an assessee under this
Act
Every person who is deemed
to be an assessee in default
under the Act
Net Wealth Assessee
21. “ASSETS” UNDER THE WEALTH TAX ACT, 1957
1. Any building or land appurtenant
thereto, whether used for residential
or commercial purposes or for the
purpose of maintaining a guest house
or otherwise including a farm house
situated within 25km from local limits
of any municipality or a Cantonment
Board, but does not include –
a. A house meant exclusively for
residential purposes and which is
allotted by a company to an officer or
a director who is in whole-time
employment, having a gross annual
salary of less than Rs. 5 Lakh.
b. Any house for residential or
commercial purposes which forms
part of stock-in-trade
c. Any house which the assessee may
occupy for the purposes of any
business or profession carried on by
him
d. Ay residential property that has been
let-out for a minimum period of 300
days in the previous year
e. Any property in the nature of
commercial establishments or
complexes.
2. Motor cars (other than those used by the
assessee in the business of running them
on hire or as stock-in-trade
3. Jewellery, bullion and 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 of such precious metals ;
provided that where any of the said
assets is used by the assessee as stock in
trade, such assets shall be deemed as
excluded from the assets specified in this
sub-clause
4. Yachts, boats and aircrafts (other than
those used by the assessee for
commercial purposes)
5. Urban land
6. Cash in hand, in excess of Rs. 50,000 of
individuals and HUF and in the case of
other persons any amount not recorded
in the books of account.
22. CHARGE OF WEALTH - TAX
Charged for wealth tax in respect of the net wealth on the corresponding valuation
date of : every individual, HUF and company, at the rate of 1% of the amount by
which the net wealth tax exceeds Rs. 30 Lakhs.
NET WEALTH COMPUTATION – TO INCLUDE
Individual – the value of assets which on the valuation date are held –
a. By the Spouse (held otherwise than for adequate consideration or in
connection with an agreement to live apart
b. By a Minor child
c. By a person or association of persons (otherwise than for adequate
consideration for the immediate or deferred benefit of the individual , his or
her spouse)
d. By a person or association of persons (transfer otherwise than under an
irrevocable transfer)
e. By the son’s wife (otherwise than for adequate consideration)
Note : Where the transfer of such assets or any part thereof is wither chargeable to
gift-tax under the Gift tax Act, 1958, the value of such assets or part thereof , as
the case may be, shall not be included in computing the net wealth of the individual
23. The value of any assets transferred under an irrevocable transfer shall be liable to be
included in computing the net wealth of the transferor as and when the power to revoke
arises to him.
The holder of an impartible estate shall be deemed to be the individual owner of all the
properties comprised in the estate.
Of an assessee who is a partner in a firm or a member of an association of persons , there
shall be included, as belonging determined in the manner laid down in Schedule III
Provided that where a minor is admitted to the benefits of partnership in a firm, the value of the
interest of such minor of the firm, determined in the manner specified above shall be included in
the net wealth of the parent of the minor, so far as may be, in accordance with the provisions of
the third proviso to clause (a)
NET WEALTH COMPUTATION (CONTD.)
EXEMPTIONS IN RESPECT OF CERTAIN ASSETS
Any property held by assessee under trust or other legal obligation for any public
purpose of a charitable or religious nature in India
The interest of the assessee in the coparcenary property of HUF of which he is a
member.
In the case if an assessee, being a person of Indian origin who was ordinarily residing
in a foreign country and who, on leaving such country has returned to India with the
intention of permanently residing therein, moneys and the value of assets brought by
him into India and the value of assets aquired by him out of such moneys (within 1
year immediately preceeding the date of his return and at any time thereafter)
Provided that this exemption shall apply only for a period of seven successive
assessment years commencing with the assessment year next following the date on
which such person returned to India.
One house or part of a house or a plot of land belonging to an individual or a HUF;
Provided that wealth – tax shall not be payable by an assessee in respect of an
asset being a plot of land comprising an area of 500 sq. mts or less.
24. EXCLUSION OF ASSETS AND DEBTS OUTSIDE INDIA
In computing the net wealth of an Individual [ who is not a citizen of India or
of an Individual] or a HUF not resident in India or resident but not ordinarily
resident in India, or of a company not resident in India during the year
ending on the valuation date –
The value of the assets and debts located outside India and
The value of the assets in India represented by any loans or debts owing to
the assessee in any case where the interest, if any, payable on such loans or
debts is not to be included in the total income of the assessee under Section
10 of the Income – tax act
DETERMINING VALUE OF ASSETS
The value of any asset, other than cash, for the purposes of this Act shall be
its value as on the valuation date determined in the manner laid down in
Schedule III.
The value of 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
be 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
hjouse or the valuation date relevant to the assessment year commencing on
the 1st day of April, 1971, whichever valuation date is later
25.
26. SCHEDULE III
RULES FOR DETERMINING THE VALUE OF ASSETS
IMMOVABLE PROPERTY
Step I : Gross maintainable rent:
In case the property is let out
Compare
Annual rent received / receivable
Plus municipal taxes borne by the tenant
Plus 1/9th of the actual rent if repair expenses are borne by the tenant
Plus 15% p.a on the amount of deposit outstanding from month to month as reduced by the
interest actually paid by the owner
Plus Premium received on leasing of property divided by the number of years of period of
lease
Plus any other benefit or perquisite derived from the property
Annual value as assessed by local authority
HIGHER OF THE TWO
In case the property is not let out
If assessed by the local authority - the annual rent so assessed
If no such assessment or situated outside the jurisdiction of local authority – the amount
which the owner can reasonably expect to receive as annual rent had such property been let
27. IMMOVABLE PROPERTY (CONTD.)
Step II : Net maintainable rent
Gross mainable rent
Minus taxes levied by local authority in respect of such property
Minus 15% of the gross maintainable rent
o Step III: Capitalisation of the net maintainable rent:
If construction on freehold land:
Net maintainable rent X 12.5
If construction on leasehold land:
Net maintainable rent X 10 (if unexpired period of lease is 50 years or more)
X 8 (if unexpired period of lease is less than 50 years)
Step IV: Substitute cost of construction plus Improvement
(if such cost is higher than the value arrived in Step III.
Substitution not to apply in respect of one self-occupied property selected at
the option of the assessee where the cost of construction plus cost of
improvement does not exceed Rs. 50 lakhs, if situated at Bombay, Calcutta,
Delhi and Madras and Rs. 25 lakhs, if situated at any other place
28. Step V : Premium
Add to the value at Step IV, premium on the following basis :
Step VI : Unearned Increase
Deduct unearned increase in the value payable to the government or any
authority assuming that the property is transferred on the valuation date subject
to maximum of 50 percent of the value of property as arrived at in Step IV.
Step VII : Special provision in respect of self-occupied property
Assessee is given an option to determine the value as per Steps I to VI on the
valuation date next following the date on which he became the owner of the
house or on the valuation date relevant to assessment year 1971-72, whichever
is later. This option can be exercised in respect of any number of properties.
IMMOVABLE PROPERTY (CONTD.)
The excess of ‘unbuilt area’ over ‘specified area’ Premium
Not more than 5 % of the ‘aggregate area’ Nil
More than 5% but not more than 10% of the ‘aggregate area’ 20%
More than 10% but not more than 15% of the ‘aggregate area’ 30%
More than 15% but not more than 20% of the ‘aggregate area’ 40%
