WEALTH TAX ACT,1957
Charge Of Tax
Charge Of Tax
• It is charged for every assessment
year commencing from 1/4/1957 in
respect of net worth.
• Wealth tax is charged on the net
wealth of the assessee.
Who Is An Individual
Who Is An Individual
• A natural person or human being.
• Hindu deity.
• Group of individuals being trustees of
a trust.
• Holder of an impartible estate.
• Group of individuals.
Who Is Not An
Individual
• A company.
• A corporation established by state or
central acts.
• A co-operative society.
Hindu Undivided Family
• Limited to Mitakshara families.
• Dayabhaga school is not a HUF.
• If a hindu converts to christianity,
he cannot be granted the status of
HUF.
What Is A Company
What Is A Company
• Any Indian company.
• Any body corporate incorporated
outside India.
• Any institution, AOP, BOI which is or
was assessable or was assessed for
any assessment year under Indian
Income Tax Act, 1922(now replaced
by 1961).
What Is An Asset
[Section 2(ea)]
• Any building or land appurtenant
thereto whether used for residential
or commercial purpose.
• Motor cars (other than used by
assessee’s in business).
•
•
•
•
Jewellery,
Bullion
Furniture
Utensils or any other article made
wholly and partly of gold, silver,
platinum or any other precious metal.
• Yachts, boats & aircraft. (Note :Helicopter is not covered under
aircraft)
• Urban land.
• Cash in hand in excess of Rs.50,000.
Incidence Of Wealth
Tax
• The liability of wealth tax depends
upon the citizenship & residential
status.
• For HUF, it depends totally upon
residential status.
Individual, Not A citizen
Of India
Individual, Not A citizen
Of India
• All assets in India except the value of
assets in India represented by any loan or
debts.
• All debts in India except:
a) The debt secured on any property or
incurred in relation to any property on
which wealth tax is not payable.
b) Tax liability under direct tax if
outstanding on valuation date.
c) All assets and debts outside India are
out of the scope of wealth tax.
An Individual, Citizen
And Resident In India
An Individual, Citizen
And Resident In India
• All assets in India and assets located
outside India are taxable.
• All debts in India and outside India
are to be taken in computing the net
wealth.
In Case of HUF,
Resident
• All assets in India and assets outside
India.
• All debts in India and outside India
are deductible in computing net
wealth.
HUF, RNOR & NRI
HUF, RNOR & NRI
• All assets in India except the assets
represented by any loans and debts
owing to the assessee interest
whereon is exempt from income tax
act.
• All debts in India except debts
secured on any property in which
wealth tax is not payable.
• All assets and debts outside India
are not chageable.
Valuation Date, Section
2(q)
• It is the last day of the previous
year for income tax assessment.
• It is a tax base of the levy of wealth
tax.
• Where a person is not an assessee
under Income Tax Act, the valuation
date will be always on March 31st.
Tax Rate, Section 3
• It will be charged in respect of net
wealth on the corresponding valuation
date of every individual and HUF at
the rate of 1% of the amount by
which the net wealth exceeds Rs.30
lakhs.
Deemed Assets
• The individual must be the owner of
these assets.
• These assets must be transferred
without adequate consideration.
• These assets must be held by the
transferee on the valuation date.
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)
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).
• 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 assass in the coparcenaries or member
of an HUF
• Any one hose 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.
• Jewelry 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.
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.
• Following assets are not included:
1. Assets exempt under sec 5(1).
2. Asset lost, destroyed or stolen on
or before valuation date.
What Is Debt?
What Is 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.
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.
Wealth Escaping
Assessment, Section 17
• If the assessing officer has reason to believe
that the net wealth of any person has escaped
assessment for any assessment year, he may be
subjected to the provisions of the act serve on
such person a notice requiring him to furnish
within such period as specified in the notice, a
return in the prescribed form and prescribed
manner setting forth the net wealth of such
person is 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 relevant
assessment 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 the
assessment 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 year
from the end of the financial year in
which the notice under sec 17(1) was
served.
Conclusion
Conclusion
The revenue from wealth tax is negligible as
compared to the revenue from income tax.
The expenses incurred in collection the
wealth tax is very high compared to the
revenue earned.
An important point to note is that the wealth
tax is unable to keep a check on the
affluent people of the society as it fails to
bridge the gap between the rich and the
poor, as the tax rate is extremely low.