The document outlines the Wealth Tax Act which was implemented in India from assessment year 1957-58 and abolished from assessment year 2016-17. It details the chargeability of wealth tax on individuals, Hindu undivided families (HUF), and companies, along with definitions of key terms, applicable assets, and conditions for exemptions. Additionally, it provides information on clubbing of assets and circumstances under which wealth tax is not applicable.

1. Wealth Tax
[ A.Y. 2015-16 ]
By Rajesh Jain, CA
rmjainca@gmail.com

2. Wealth Tax
The Wealth Tax Act, which came into force from AY 1957-58,
occupies a place of importance in the scheme of taxation. It
is, therefore, necessary to understand broad & salient
features of this Act.
[ However, this Act has been abolished wef AY 2016-17 ]

3. Wealth Tax
Chargeability [ Sec. 3 ]
Wealth Tax is charged for every assessment year in respect
of net wealth as on the corresponding valuation date of
every Individual, HUF & Company, at the rate of 1% on the
amount by which net wealth exceeds Rs.30,00,000/- ( wef 2010-
11 ).

4. - Definitions -
1] ASSESSEE
[ Sec 2 (c) ] :
Assessee means a person* by whom wealth tax or any other sum of money is
payable under the Wealth Tax Act,1957, or in respect of whom any proceeding
under that Act has been initiated for determining the wealth tax payable by
him or the amount of refund due to him and includes :
i) legal representative of deceased person.
ii) Executor of the estate of the deceased person.
iii) A person deemed to be the Agent of any person residing outside
India.

5. Definitions..
2) Assessment Year
[ Sec 2 (d) ] :
An Assessment year mean a period of 12 months commencing on 1st
April and ending on 31st March of the following year.
e.g. For instance, A.Y.2015-16, commenced on 1st April,2015 and
will end on 31st March, 2016.

6. - Definitions -
3) Valuation Date
[ Sec 2 (q) ]
`Valuation Date’ in relation to an `Assessment year’ means
the last day of the previous year as defined in the Section 3
of the Income Tax Act.
Therefore, Valuation date will be 31st March, being the last
day of the uniform previous year in all cases.

7. -
Definitions...
4) Assets
[ Sec 2 (ea) ]
Assets other than assets specified in Sec 2(ea) are outside the purview of the Wealth Tax Act and hence not
chargeable to wealth tax.
In other words, Wealth tax is chargeable only on assets specified in Section 2(ea).
The assets specified in Sec 2(ea) are :
1) House – Any Building or land appurtenant thereto , whether used for residential or commercial purposes
or for the purpose of maintaining a guest house or [a farm house in an urban area or within 25 km of any
municipality.]
Exceptions – House which are
(a) Meant exclusively for residential purposes and which are allotted by a company to a whole
time employee ( including officer Or director in whole time employment), having gross annual salary of less
than Rs.10 Lacs.
(b) Stock-in-trade
(c) Occupied for business or profession of the assessee.
(d) Residential property which is let out for a minimum period of 300 days in the previous year.
(e) Commercial Establishments or complexes.

8. - Definitions..
(2) Motor Cars :
Except -> stock-in-trade OR those used in the business of letting the cars on hire.
(3) Jewellery :
Except -> Stock-in-trade.
(4) Yachts, boats and aircraft :
->Other than those, used for commercial purposes.
(5) Urban Land : Any land situated in urban area.
Exceptions ->
(i) Land on which construction of a building is not permissible under any law.
(ii) Land occupied by any building which has been constructed with the approval of the
appropriate authority.
(iii) Unused land held for industrial purposes upto 2 years.
(iv) Land held as stock-in-trade, upto 10 years.
(6) Cash in Hand
-In case of Individual/HUF à amount in excess of Rs.50000/-
-In case of others à Any amount NOT Recorded in Books

9. - Definitions..
5) Net Wealth
[ Sec 2 (m) ]
Net wealth means the aggregate value of all chargeable
assets, wherever located, belonging to the assessee on the
valuation date, including assets which are to be included in
his net wealth as reduced by the aggregate value of all the
debts owned by the assessee on the valuation date which have
been incurred in relation to the assets .
[ Note : Wealth Tax Liability, on the aforesaid date will not
be deductible as a debt for arriving at the net wealth.]

10. - Definitions -
6) Assessable Entities
[ Sec 3 ]
Under Sec. 3, Wealth Tax Act, the following persons are chargeable
to wealth tax on their net wealth as on the Valuation date,
corresponding to the Assessment year :
(i) Individual,
(ii) Hindu Undivided Family, and
(iii) Company.
The word Individual have not been defined in the Wealth Tax Act, but
on the basis of court decisions, it has been given wide meaning. The
word `Individual’, therefore, means not only a human being but also
includes a group of persons forming an unit.

11. Wealth Tax
Wealth Tax In-applicability
[ Sec 45 ]
Wealth tax is Not Applicable in respect of the following :
(a)Sec.25 Company
(b)Co-operative Society
(c)Social Club
(d)Political Party
(e)Mutual Fund specified u/s 10(23D) of I.T.Act.
Reserve Bank of India.

12. Clubbing of Assets [ Sec 4 ]
●
(1)Asset Transferred to Spouse
( Sec 4(1)(a)(i) )
Value of assets which are transferred directly or indirectly
(otherwise than for adequate consideration or in connection
with agreement to leave apart) by a husband to his wife or by
a wife to her husband are to be included in the hands of
transferor.

13. Clubbing of Assets..
(2) Asset Transferred to Minor Children other than a married daugther
( Sec 4(1)(a)(ii) )
Value of assets which on the valuation date are held by a minor child ( not being a
married daughter) of an individual are to be included in the net wealth of the parent who
is having greater net wealth or where the marriage of parents does not subsist, in the net
wealth of the either parent, such assets shall not be included in the succeeding year
unless assessing officer is satisfied after giving that parent an opportunity of being
heard, that it is necessary to do so.
However, assets acquired by the minor child out of his income, NOT to be included in the
net wealth of his parent.
Further, where the assets are held by minor child suffering from any disability of the
nature specified in section 80U of the Income Tax Act, such assets also will not be
included in the net wealth of parent. Such minor child’s wealth will be assessed in the
hands of such child.

14. Clubbing of Assets..
(3) Asset Transferred to Person or AOP
( Sec 4(1)(a)(iii) )
Value of assets which are transferred by the individual ,directly or
indirectly (otherwise than for adequate consideration ) to a person or
association of persons for the immediate or deferred benefit of the individual
or spouse, shall be included in the net wealth of the individual.
(4) Asset Transferred to AOP otherthan irrevocable transfer
( Sec 4(1)(a)(iv) )
Value of assets which are transferred by the individual to a person or
association of persons is to be included in the hands of transferor, if the
transfer is by way of revocable transfer.
In other words, if the transfer is by way of an “irrevocable transfer”, the
asset will not be deemed as belonging to the transferor.

15. Clubbing of Assets..
(5) Asset Transferred to Son’s wife
( Sec 4(1)(a)(v) )
The value of assets transferred by an individual, directly or indirectly
(otherwise than for adequate consideration) to his or her son’s wife on
or after 1-6-1973 are to be included in the hands of transferor.
(6) Asset Transferred to a person or AOP for the benefit of Son’s wife
( Sec 4(1)(a)(vi) )
The value of assets transferred by an individual, directly or indirectly
(otherwise than for adequate consideration) to a person or association
of persons for the immediate or deferred benefit of son’s wife on or
after 1-6-1973 are to be included in the hands of transferor.

16. Clubbing of Assets...
Note : It is not necessary that the transferred asset should be held by the transferee on
the valuation date in the same form in which it was transferred. Thus if an individual
transfers cash to the spouse or minor child ( including a step child or adopted child)
which is used before the valuation date for the purchase of house property, and /or say
urban land, it is the value of the asset so acquired which is to be included in the net
wealth of the individual and not the cash originally transferred . [ Proviso to Sec 4(1)
(a) ].
(7) Interest of an assessee in a firm or AOP
( Sec 4(1)(b) )
Where a minor is admitted to the benefit of partnership, the interest of such minor in
the firm determined as laid down in Schedule III, will be included in the net wealth of
the parent who is having greater net wealth or where the marriage of his parents does not
subsist in the net wealth of either parent who maintain the minor child.

17. Clubbing of Assets..
(8) Conversion of individual property into HUF
[ Sec 4(1A) ]
Where an individual transfers his separate property, directly or
indirectly, to the Hindu Undivided Family ( HUF ) or which he is a
member, for inadequate consideration, the value of such transferred
property (even by way of gift ) will be included in the net wealth
of the individual.
In the event of partial or total partition of HUF, the share
attributable to the spouse of the individual in the converted
property will be included in the net wealth of the individual.

18. Clubbing of Assets..
(9) Deemed ower in Certain types of properties
[ Sec 4(7) & Sec 4(8) ]
Deemed owner of house :-
- Member of Co-operative Society, Company or AOP.
- Property in the possession of a person as referred to in Sec 53A
of Transfer of Property Act, 1882 under part performance.
- Lessee other than month-to-month lessee and as referred to in
Sec 269UA(f) of the I.Tax Act.

19. Exemptions [ Sec 5 ]
Sec 5 of the Wealth Tax Act,1957 enumerates the various assets which are exempt from wealth tax :
1)Property held under trust for public purpose of a charitable or religious nature in India. [ Sec 5 (i) ]
2)The share of Assessee in the property of HUF [ Sec 5(ii) ]
3)Any one building occupied by a Ruler. [ Sec 5(iii) ].
4)Jewellery of a Ruler, recognised as heirloom [Sec 5(iv)].
5)Assets acquired out of moneys brought in by a NRI, who has returned to India with an intention to permanently resides in
India. The exemption is for 7 successive assessment years. [ Sec 5(v) ]
6)(i) One house or
(ii) part of a house (whether commercial or residential ) or
(iii) a plot of land not exceeding 500 sq. Metres, belonging to an individual or HUF. [ Sec 5 (vi) ].
[ Remember, exemption under Sec 5(vi) is allowed only to Individual/HUF assessee.]

20. Thank you