Wealth Tax

Presentation byHarshad Jain

What is taxation? A means by which government finance

their expenditures by imposing charges on citizens and corporate entities.

Why Tax is collected?Government use taxation to encourage or

discourage certain economic decision.◦Example: Reduction in taxable personal (or

household) income by the amount paid as interest on home mortgage loans results in greater construction activity, and generates more jobs.

BranchesTax

Direct

Income tax

Wealth tax

Indirect

Sales tax

Service tax

Excise duty

Wealth Tax

ApplicabilitySection 1

◦The Wealth Tax Act, 1957 extends to whole of India.

◦ It came in force since 1-4-1957.

Charge / Applicability Every individual, HUF or company who is an

assessee shall be charged with wealth tax at the rate of 1% on the amount by which his net wealth determined on the basis of his nationality and residential status on the valuation date exceeds Rs 30,00,000/-.

Persons not liable to wealth taxAny company registered under section 25 of the

companies act, 1956. [non-profit making company]Any co-operative societyAny social clubAny political partyA mutual fund specified in Income tax

Meaning of Net WealthParticulars Amount

Value of the asset belonging to the assessee on valuation date xxx

Add: Deemed wealth u/s 4 xxx

Total Xxx

Less: Assets exempt u/s 5 Xxx

Less: Debts incurred (loan taken) Xxx

Net Wealth Xxx

Assets u/s 2 (ea) of the Wealth Tax Act.

Assets includes Assets excludesBUILDING• used for residential purpose• used for commercial purpose• guest house• farm house situated within 25 km form local limits of muncipality

• residential house given by a company to its employees having salary less than 5 lakhs.• residential or commercial house forming part of stock in trade.•House occupied by assessee for his own business or profession,• residential house let-out for a period of 300 days or more during the year.

Assets includes Assets excludesMOTOR CAR• Motor car including jeep, SUV but excluding Heavy motor vehicles.

• Motor car used in the business of running on hire.• Motor car held as stock in trade in the business.

JEWELLERY• Jewellery or any other article made wholly or partially of gold and silver.

• Jewellery held as stock in trade in the business.• gold deposit bonds.

BOATS & AIRCRAFTS• Boats / aircrafts used by assessee for commercial purposes.• ships

Assets includes Assets excludesURBAN LAND

• urban land on which construction of a building is not permitted.• land occupied by any building contructed by the approval of authority• land held for industrial purpose for a period of two years from the date of acquasition.• land held by the assessee as stock in trade for a period of 10 years from the date of acquasition.

Assets includes Assets excludesCASH• in case of individual or H.U.F any amount in excess of Rs 50,000/-• for others amount not recorded in the books of account.

• for individual/ H.U.F any amount less than Rs 50,000/-• for others amount recorded in the books of account.

Exemptions available u/s 5.In the hands of Types of asset

i. Charitable trust

ii. Member of H.U.F.

iii. Ex-ruler property

Property held under trust for any public purpose of charitable or religious nature in India excluding assets of business carried on by trust.

Any interest in the H.U.F. property as a member.

Any one building in the occupation of a ex-ruler which was his official residence by the central government.. The let out buildings are not allowed.

iv. Ex- ruler jewellery

v. N.R.I., returning to India for permanent residence

Jewellery in possession of ex-ruler recognized as his heir-loon jewellery but personal jewellery is not exempt.

•The assessee should be an Indian citizen or of Indian origin.•He returns to India with an intention to permanently reside in India.•Money and value of assets brought by him or assets purchased out of money kept in N.R.I account•Time limit for exemption is 1yr before or 7yrs after the date of return.

vi. Individual / H.U.F. •one house or part of the house or plot of land upto 500sq.m.•If house is owned by the firm, then the partners may claim exemption in the proportion of their share in that asset.

Assessment under Wealth Tax

AssessmentsSelf assessment

Scrutiny assessment

Best judgment assessment

Limitation of time for assessmentNature of Obligation Time limit

1. Intimation for any tax or interest found due after adjusting refund.

Within two years from the end of the assessment year.

2. Service of notice requiring assessee’s attendance, production of evidence in support of return of income.

Within 12months from the end of the month in which return is furnished.

3. Service of notice for reassessment.a) Where wealth which has

escaped assessment has exceed 10 lakhs.

a. Within 4yrs from end of the relevant assessment year.

b) Where wealth which has escaped assessment is 10 lakhs or more.

b. Within 6yrs from the end of the relevant assessment year.

4. Passing assessment order u/s 16

Within 2 yrs from the end of the assessment year.

THANK YOU