WEALTH TAX Wealth tax is not a very important or high revenue tax in view of various exemptions.

Wealth tax is a socialistic tax. It is not on income but payable only because a person is wealthy. Valuation Date Wealth tax is payable on net wealth on valuation date. As per Section 2(q), valuation date is 31st March every year. It is payable by every individual, HUF and company. This provision does not apply to a. Company registered U/s 25 of the companies Act, 1956 b. Cooperative society and c. Any social club d. Any political party e. Any mutual fund U/s 10(23D) ChargeabilitySec.3: Wealth tax is charged for every assessment year in respect of the net wealth on the corresponding valuation date of every Individual Hindu Undivided Family and Company at the rate of 1% of the amount by which the net wealth exceeds Rs.30 Lakhs. Education Cess of 3% is not leviable on the amount of Wealth Tax. Applicability of wealth tax: 1. Individual: The following persons treated as individual u/s 3 of the wealth tax. a) Legal hires of an Individual. b) Holder of an impartible estate. c) Hindu deities (it means formal a god/goddess ) d) Trustees of a trust who are liable u/s 21A. e) Trade unions 2. HUF 3. Company

Rounding off Net Wealth [Section 44C]: The net wealth computed above shall be rounded off to the nearest multiple of one hundred rupees.

Net wealth on valuation date is chargeable to wealth-tax in the immediately following assessment year. Net wealth in excess of Rs. 15, 00,000 (Rs. 30, 00,000 from the assessment year 2010-11) is chargeable to wealth tax @ 1 per cent(no surcharge, education cess and secondary and higher education cess). Assessment year - Assessment year means a period of 12 months commencing from the first day of April every year falling immediately after the valuation date [Section 2(d)]. Net wealth how computed The term net wealth means taxable wealth. Broadly speaking, it represents the excess of assets over debts. Assets include deemed assets but do not include exempt assets. Assets [sec. 2(ea)] "Asset", in relation to the assessment year commencing on the 1st day of April, 1993, or any Subsequent assessment year, means: A. Building : Any building or land appurtenant thereto, whether used for Residential purpose or Commercial purposes or For the purpose of maintaining a guest house [including a farm house situated within twenty five kilometers from the local limits of any municipality) But does not include Residential house is allotted by a company to an employee or an officer or a director who is in wholetime employment, having a gross annual salary of less than ten lakh rupees Any house for residential or commercial purposes which forms part of stockintrade: any house which is occupied by the assessee for the purposes of any business or profession carried on by him any residential property which is let out for a minimum period of 300 days in the previous year any property in the nature of commercial establishments or complexes. B. Motor Cars: Motor cars other than those used by the assessee in the business of running them on hire or as stockintrade Motor Cars covers all motor vehicle other than heavy vehicles. Hence, buses, trucks, tempos are not considered as Motor Cars, However, Jeep, Sport Utility Vehicle (SUV), Multi Utility Vehicle (MUV), are classifiable as Motor Car. C. Jewellery: 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 of such precious metals Exclude: Provided that where any of the said assets is used by the assessee as stockintrade, the gold deposit bonds issued under the Gold Deposit Scheme, 1999 notified by the Central Government. D. Yachts, Boats and Aircrafts: Yachts, boats and aircrafts other than those used by the assessee for commercial purposes. Aircraft used by the Assessee for its own business shall be

treated as commercial purpose. For example, aircrafts used for transporting goods of the assessee, or carrying its Directors of Executives of Employees, shall not be treated as used for commercial purpose. E. Urban Land: Urban land situated in specified area specified area' definition given u/s.2(1A) of Income tax Act applies Situated within municipality, etc. which has a population of not less than 10,000 as per latest census on the first day of previous year. Situated within 8 kilometers from the notified local limits. Urban land does not include Land on which construction of a building is not permissible under any law for the time being in force in the area in which such land is situated or Land occupied by any building which has been constructed with the approval of the appropriate authority or Any unused land held by the assessee for industrial purposes 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 for a period of ten years from the date of its acquisition by him. F. Cash in Hand: Cash in hand, in excess of Rs. 50,000/for individuals and Hindu undivided families and in the case of other persons, any amount not recorded in the books of account. Exemption in respect of certain assets Sec.5: Wealth tax shall not be payable by an assessee in respect of the following assets and such assets shall not be included in the net wealth of the assessee: 1. Charitable / Religious institutions / fund / trust: Property held under trust for public purpose of charitable/religious nature in India ( excluding assets of business other than business carried on by an institution/fund, etc referred to in Sec.s 10 (23B), and (23C) and business referred to in Sec. 11 (4A) (a)/(b) of the Income tax Act 2. Member of HUF: Interest in coparcenary property of HUF 3. Ex Ruler: a) Building: Any one building (being official residence) in the occupation of a ExRuler However let out building are not entitled for exemption. b) Jewellery: Jewellery in possession of Ruler, recognised as his heirloom subject to the following conditions. The jewellery shall be permanently kept in India and shall not be remove outside India except for purpose and period approved by the Board Reasonable steps shall be taken for keeping the jewellery substantially in its original shape Reasonable facility shall be allowed to any Officer of Government authorize by Board to examine such jewellery. In case any of the above conditions are not fulfilled the Board may retrospectively withdraw the recognition after recording the reasons in writing.

NRIs returning to India for permanent residence: Money/assets brought by person of Indian origin/citizen of India (returning from abroad for permanent residence) into India and assets acquired out of such money within one year preceding date of return and at any time later. Such exemption is available for 7 successive assessment years from the date of his arrival in India. The money standing to the credit of such person in NR(E) account would also be eligible for such exemption. Assets acquired out of such balance in NR(E) account gets exempted is the same manner 5. Individual / HUF: In case of an Individual or a HUF a) a house or a part of house or b) a plot of land not exceeding 500 sq.meters in area.
4.

Deemed Assets: a) Transfer to spouse/son's wife Sec. 4(1)(a): Assets transferred by the assessee in the following circumstances for inadequate consideration to the persons mentioned below shall be deemed as assets belonging to him for computation of net wealth. Assets transferred to spouse not in connection with an agreement to live apart. Assets transferred to a person or association of persons for immediate or deferred benefit of the transferor or transferor's spouse. Assets transferred to the son's wife. Assets transferred to a person or an AOP for immediate or deferred benefit of the son's wife. The above assets shall be deemed to be assets of the transferor even if they are not held in the form in which they were transferred. b) Clubbing of minor's wealth: Assets held by minor child. [Sec. 4(1)(a)(ii)] The assets held by the minor child will be clubbed in the hands of parent as indicated below. If the marriage subsist: In the hands of the parent whose net wealth is greater before including the minors asset, If the marriage does not subsist: In the hands of the parent who maintains the minor child in the relevant previous year. Exception: a. Assets held by a minor child who is suffering from any disability as specified U/s 80U of the Income Tax Act, 1961. b. Assets held by a minor married daughter c. Assets acquired by a minor child out of the Income from manual work done by him or income from activity involving application of his skill, knowledge or experience. d. Child means legitimate child and includes adopted children. c) Interest in the assets of firm or AOP Sec. 4(1)(b): Where the assessee is a partner in a firm or a member of an AOP, the value of interest the assets of the firm or the AOP is included in the net wealth of the assessee. Where a minor is admitted to

the benefits of partnership in a firm, the value of the interest of such minor in the firm shall be included in the net wealth of the parent of the minor in the manner stated above. d) Transfer or conversion by member of HUF Sec. 4(1A): Where an individual converts his selfacquired property into property belonging to family or transfers the property to the family for inadequate consideration, it shall deemed to be the asset of the individual. If partition takes place, the converted property as received by the spouse shall be deemed to be the assets of the individual. e) Assets transferred under a revocable transfer Sec. 4(5): 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. This implies that the value of any asset transferred under a revocable transfer shall be liable to be included in computing the net wealth. Revocable transfer means the following transfers in accordance with explanations sec.4: Transfers revocable within a period of 6 years. Transfers revocable during the lifetime of the transferee. Transfers where the transferor continues to derive the benefit from the asset, directly or indirectly. Transfer of an asset where the transfer deed provides for the retransfer of either the income or the asset to the assessee. Transfer of an asset where the transfer deed gives the transferor assessee a right to reassume power over the asset or the income. f) Gift by book entries Sec. 4(5A): Gifts of money by book entries made in the books maintained by the assessee to any other person with whom he has business relationship or any other relationship it shall be deemed to be his asset unless the Assessing Officer is satisfied that money has actually been delivered to the other person at the time the entries were made. g) Impartible Estate Sec. 4(6): Holder of an impartible estate shall be deemed to be the individual owner of all the properties comprised in the estate. h) Building allotted by Housing Society Sec. 4(7): Where the assessee is a member of a cooperative housing society or a company or any association of persons to whom a building or part thereof is allotted or leased to him under a house building scheme, the assessee is deemed to be the owner of such building or part thereof. In determining the value of such building any outstanding installments payable by the assessee to the society towards the cost of such building or part thereof shall be deductible as debts owed by the assessee.