Wealth tax act,1957.bose

WEALTH TAX ACT,1957WEALTH TAX ACT,1957

Shankar BoseInspector of Income-

taxMSTU, Puri

Return Of WealthReturn Of Wealth

Sec 14 : filing of wealth Tax Sec 14 : filing of wealth Tax ReturnReturn

A belated or revised return at any A belated or revised return at any time before the expiry of one year time before the expiry of one year from the end of the relevant from the end of the relevant assessment year or before the assessment year or before the completion of assessment, whichever completion of assessment, whichever is earlier.is earlier.

Charge Of TaxCharge Of Tax

Wealth tax is charged on the net Wealth tax is charged on the net wealth of the following type of wealth of the following type of assessee.assessee. IndividualIndividual HUFHUF CompanyCompany

However However Sec.45Sec.45 excludes the following excludes the following from the charge of wealth tax:from the charge of wealth tax:

Any company registered under section 25 Any company registered under section 25 of the Companies Act 1956.of the Companies Act 1956.

Any Co-operative SocietyAny Co-operative Society Any Social clubAny Social club Any political partyAny political party Any mutual fund specified u/s 10(23D) of Any mutual fund specified u/s 10(23D) of

the IT Act.the IT Act.

IndividualsIndividuals

Individual includes members of AOP Individual includes members of AOP where members’ shares are where members’ shares are determinate. determinate.

HUF includes Sikh and Jain families.HUF includes Sikh and Jain families.

What Is An Asset What Is An Asset

Sec 2(e)-Upto AY 92-93Sec 2(e)-Upto AY 92-93 Sec 2(ea)- from 93-94Sec 2(ea)- from 93-94 Earlier it was property of all Earlier it was property of all

description with few exceptionsdescription with few exceptions

Now only some specified assetsNow only some specified assets

What Is An Asset [Section 2(ea)]What Is An Asset [Section 2(ea)]

Any building or land appurtenant Any building or land appurtenant thereto thereto

Whether used for residential or Whether used for residential or commercial commercial

Purpose / guest house / firm house.Purpose / guest house / firm house.

What Is An Asset [Section What Is An Asset [Section 2(ea)]2(ea)]

Jewellery, bullion & furniture, utensils orJewellery, bullion & furniture, utensils or

any other article made wholly & partly of any other article made wholly & partly of

gold, silver, platinum or any othergold, silver, platinum or any other

precious metal. Except stock in trade.precious metal. Except stock in trade.


Yachts, boats & aircraft(Not asset Yachts, boats & aircraft(Not asset whenwhen

used for commercial purpose).used for commercial purpose).

Urban land.Urban land.


Motor cars (other than stock in trade Motor cars (other than stock in trade oror

used for running on hire).used for running on hire).

Cash in handCash in hand

House PropertyHouse Property

used for used for residential or commercial residential or commercial purposes orpurposes or

maintained as a guest house maintained as a guest house

and and includes a farm houseincludes a farm house

situated within 25 kms from the local situated within 25 kms from the local limitslimits

of a municipality, corporation orof a municipality, corporation or

cantonment board cantonment board but does not include but does not include :-:-

House Property- exceptionsHouse Property- exceptions

1. HP exclusively for residential 1. HP exclusively for residential purposespurposes

House Property- exceptionsHouse Property- exceptions 2.. Any house 2.. Any house allotted by a companyallotted by a company

exclusively for exclusively for residentialresidential purposes to purposes to

its its employee, /officer /or a whole timeemployee, /officer /or a whole time

director director having gross annual salary ofhaving gross annual salary of

less than 5 lakhsless than 5 lakhs. .


3.. Any residential house or 3.. Any residential house or

commercial house held as commercial house held as stock stock in tradein trade..


4. Any house occupied by the 4. Any house occupied by the assessee for his own assessee for his own business or business or profession. profession.


5. Any residential house let out 5. Any residential house let out for a for a

period of period of 300 days or more 300 days or more during during the the

P.Yr.P.Yr.


6. commercial complex.6. commercial complex.

Urban LandUrban Land

population population 10000 or more10000 or more


Within Within 8 kilometres 8 kilometres of of municipalitymunicipality

areas . areas .


Folowing lands are not Urban Land Folowing lands are not Urban Land and hence not wealths : Where-and hence not wealths : Where- Construction is not permissible under Construction is not permissible under

lawlaw

Unused land held for Unused land held for industrial purposes industrial purposes for more than 2 yrs for more than 2 yrs

Held as stock in trade for > 10 yrsHeld as stock in trade for > 10 yrs

Cash in handCash in hand

For individual or HUF- in excess of For individual or HUF- in excess of 5000050000

For other persons any amount not For other persons any amount not recorded in booksrecorded in books

Deemed Assets(Sec 4)Deemed Assets(Sec 4)

Assets transferred from one spouse Assets transferred from one spouse to another spouse without adequate to another spouse without adequate consideration / agreement of living consideration / agreement of living apart.apart.


Asset held by minor child, Asset held by minor child,

Asset transferred by an individual to Asset transferred by an individual to sons wife or sons minor child ( + sons wife or sons minor child ( + step child ), step child ),


Asset transferred to a person or AOP Asset transferred to a person or AOP for the benefit of Son’s Wife,for the benefit of Son’s Wife,


House allotted under scheme from a co-House allotted under scheme from a co-

operative housing society when assessee is operative housing society when assessee is

member member


When possession of building etc. is When possession of building etc. is takentaken

under part performance of contract u/s under part performance of contract u/s

53A of T.P.Act.53A of T.P.Act.

Assets exempt from wealth taxAssets exempt from wealth tax( sec 5 )( sec 5 )

Property held under a trustProperty held under a trust

The interest of an assessee in The interest of an assessee in thethe

property of an HUFproperty of an HUF

Assets exempt from wealth Assets exempt from wealth tax ( section 5)tax ( section 5)

Any one building in the occupation Any one building in the occupation of a former ruler- under some of a former ruler- under some conditionsconditions

(If GOI declares it Official (If GOI declares it Official Residence )Residence )

Jewellery in possession of a ruler- Jewellery in possession of a ruler- under some conditionsunder some conditions

( If kept in India /same ( If kept in India /same shape/inspection.)shape/inspection.)

Assets exempt from wealth Assets exempt from wealth taxtax

Assets acquired from foreign Assets acquired from foreign moneymoney

by persons of Indian origin who by persons of Indian origin who

ordinarily lived abroad- now settlesordinarily lived abroad- now settles

in india- in india- exempt for seven yearsexempt for seven years

Assets exempt from wealth Assets exempt from wealth taxtax

One house ,or One house ,or

part of the house, orpart of the house, or

a plot of land comprising an a plot of land comprising an area of 500 sqmts or less.area of 500 sqmts or less.

(belonging to an individual or an (belonging to an individual or an HUF)HUF)

Exclusion of assets and debts Exclusion of assets and debts outside India- Sec 6outside India- Sec 6

STATUS R & OR R but NOR & N.R.

Individual (Indian Citizen) HUF & CO.

All assets - all debts wherever located

Indian assets - Indian debts

Individual (Foreign citizen)



Net WealthNet Wealth

According to sec 2(m), net wealth meansAccording to sec 2(m), net wealth means

Aggregate value of Aggregate value of all assets all assets belonging to belonging to the assesse on the valuation date, the assesse on the valuation date,

(MINUS ) (MINUS )

aggregate value of aggregate value of all the debts all the debts owed by owed by the assessee on the valuation date.the assessee on the valuation date.

The debt must be incurred in connection The debt must be incurred in connection with procurement of the asset.with procurement of the asset.

Steps for charging Wealth taxSteps for charging Wealth tax

Ascertain “Ascertain “AssetsAssets””

Ascertain Ascertain “Deemed Assets“Deemed Assets””

Consider “Consider “Exempt Assets”Exempt Assets”

ValueValue assets as per assets as per “Schedule III”“Schedule III” ComputationComputation of Wealth Tax of Wealth Tax

Valuation Date, Section 2(q)Valuation Date, Section 2(q)

It is the last day of the previous year It is the last day of the previous year forfor

income tax assessment.income tax assessment.

Tax Rate, Section 3Tax Rate, Section 3

at the rate of at the rate of 1% of the amount 1% of the amount by by

which the net wealth exceeds which the net wealth exceeds Rs. 30 Rs. 30

lakhslakhs..

Valuation of assets(Sch-III)Valuation of assets(Sch-III)

Valuation of immovable property - Part BValuation of immovable property - Part B

Assets of business - Part DAssets of business - Part D

Interest in firm/AOP - Part EInterest in firm/AOP - Part E

Jewellery – Part GJewellery – Part G

Valuation in other cases – Part HValuation in other cases – Part H

Immovable property stepsImmovable property steps

Step I – Gross Maintainable RentStep I – Gross Maintainable Rent

Step II – Net Maintainable RentStep II – Net Maintainable Rent

Step III – Capitalise NMRStep III – Capitalise NMR

Step IV – Add PremiumStep IV – Add Premium Step V – Deduct unearned incrementStep V – Deduct unearned increment

Gross Maintainable RentGross Maintainable Rent

When let out When let out – –

( 1)Annual rent recd/recble or ( 1)Annual rent recd/recble or

( 2 ) municipal rent valuation- ( 2 ) municipal rent valuation-

Whichever is higher Whichever is higher


When When notnot let out let out – –

( 1 ) Local Authority valuation, or ( 1 ) Local Authority valuation, or

(2) when outside such Local (2) when outside such Local Authority Authority

jurisdiction – Fair Rentjurisdiction – Fair Rent


Add Add municipal tax municipal tax if borne by tenant,if borne by tenant,

Add Add 1/91/9thth of actual rent of actual rent if repair if repair done by tenant,done by tenant,

Add Add 15% interest 15% interest if deposit taken if deposit taken from tenant(not to charge for upto 3 from tenant(not to charge for upto 3 month’s advance rent) .month’s advance rent) .

Net Maintainable Rent( step -2)Net Maintainable Rent( step -2)

From Gross Maintainable Rent deduct From Gross Maintainable Rent deduct the following :the following :

Taxes levied by local auth- whether paid Taxes levied by local auth- whether paid or notor not

15% of GMR15% of GMR

Capitalise NMR( Step -3)Capitalise NMR( Step -3)

The NMR is to be multiplied by-The NMR is to be multiplied by-

12.512.5 if the land is freehold if the land is freehold

1010 if the land is on lease for 50 years or if the land is on lease for 50 years or more (unexpired period)more (unexpired period)

88 if the land is on lease for a period if the land is on lease for a period below 50 years(unexpired period)below 50 years(unexpired period)

Add Premium: (Step - 4) Add Premium: (Step - 4) The excess of unbuilt area over specified area

Premium

Not more than 5% of aggregate area

NIL

5-10 % of aggregate area 20 % of capitalised ( NMR) value

10-15 % of aggregate area 30%

15-20 % of aggregate area 40%

More than 20% of aggregate area Rule 3 not to apply, Rule 20 applies instead

Specified Area :Specified Area :

( 1 ) 60 % of Aggregate Area ( Kol, ( 1 ) 60 % of Aggregate Area ( Kol, Del , Chennai., MumbaiDel , Chennai., Mumbai

( 2 ) 65 % for Ahmedabad Bangalore ( 2 ) 65 % for Ahmedabad Bangalore etcetc

( 3 ) 70 % for other cities.( 3 ) 70 % for other cities.

Step V – Deduct unearned incrementStep V – Deduct unearned increment

In case of In case of Govt lease of landGovt lease of land, there , there may be condition for payment of may be condition for payment of unearned increase for transfer of the unearned increase for transfer of the property. property.

2011] 12 taxmann.com499(Delhi)2011] 12 taxmann.com499(Delhi)

HIGH COURT OF DELHIHIGH COURT OF DELHI

Commissioner of Income-tax, Delhi-IXCommissioner of Income-tax, Delhi-IX

Vs. Monoflex India (P.) Ltd.*Vs. Monoflex India (P.) Ltd.* Numerical Example :Numerical Example :

When valuation to be done by Rule 20 When valuation to be done by Rule 20 of Sch IIIof Sch III

Not practicable(with approval of JCIT)Not practicable(with approval of JCIT) Difference between unbuilt area and Difference between unbuilt area and

specified area exceed 20%specified area exceed 20% Lease expires within 15 years and no Lease expires within 15 years and no

clause to renewclause to renew

Valuation of jewellery- Rule 18, Sch-IIIValuation of jewellery- Rule 18, Sch-III

It is estimated to be the price that it It is estimated to be the price that it would fetch if sold in open market on would fetch if sold in open market on valuation datevaluation date

With the returnWith the return A statement in prescribed form will be A statement in prescribed form will be

furnished when value does not exceed 5 furnished when value does not exceed 5 lakhlakh

Report of registered valuer to be given Report of registered valuer to be given when value exceed 5 lakhwhen value exceed 5 lakh

Valuation of jewellery- Rule 18, Sch-IIIValuation of jewellery- Rule 18, Sch-III

When AO is of the opinion that value so When AO is of the opinion that value so declared by assessee is less than FMV by declared by assessee is less than FMV by 33 1/3% or 50000/-33 1/3% or 50000/-

When AO is of the opinion that value When AO is of the opinion that value arrived at by Regd. Valuer is less than arrived at by Regd. Valuer is less than FMVFMV He will refer the case to Valuation OfficerHe will refer the case to Valuation Officer Value so decided will be adopted for four Value so decided will be adopted for four

yearsyears Circular No 646 dated 15.3.1993Circular No 646 dated 15.3.1993

Business Asset- Rule 14 Sch IIIBusiness Asset- Rule 14 Sch III

Step-I – Determine value as per B Step-I – Determine value as per B SheetSheet (Depreciable assets- WDV, (Depreciable assets- WDV, others Book Value)others Book Value)

Step-II – Add 20% to such valuationStep-II – Add 20% to such valuation Step-III – Find out individual valuation Step-III – Find out individual valuation

as per Sch IIIas per Sch III If Step III is more than step II take step If Step III is more than step II take step

IIIIII Otherwise take step IOtherwise take step I

Valuation of interest in firm/AOP Valuation of interest in firm/AOP Rules 15,16 Sch-IIIRules 15,16 Sch-III

Step I – Determine asset value without giving Step I – Determine asset value without giving effect to sec 5effect to sec 5

Step II – Say this value is Rs 20 and say total Step II – Say this value is Rs 20 and say total capital of partners/members is Rs 8 in the capital of partners/members is Rs 8 in the ratio 2:3:3. Then Rs 8 out of 20 will be ratio 2:3:3. Then Rs 8 out of 20 will be distributed in the ratio 2:3:3 and balance 12 distributed in the ratio 2:3:3 and balance 12 will be distributed in the asset sharing ratio will be distributed in the asset sharing ratio on desolutionon desolution

Step III – Individual assets are valued as usual Step III – Individual assets are valued as usual and exemption is allowed even the asset and exemption is allowed even the asset pertains to the firm/AOPpertains to the firm/AOP

Assessment - IntimationAssessment - Intimation Sec. 16(1):Sec. 16(1): Where is return has been made either u/s Where is return has been made either u/s

14 or 15 or in response to a notice u/s 16(4)(i).14 or 15 or in response to a notice u/s 16(4)(i). (i)(i) if any tax or interest is found due on the basis of such if any tax or interest is found due on the basis of such

return after adjustment of prepaid taxes an intimation shall be return after adjustment of prepaid taxes an intimation shall be sent to assessee specifying the amount so payable and such sent to assessee specifying the amount so payable and such intimation shall be deemed to be notice of demand u/s 30.intimation shall be deemed to be notice of demand u/s 30.

(ii)(ii) if any refund is found due on the basis of such return if any refund is found due on the basis of such return the refund shall be granted to the assessee and an intimation the refund shall be granted to the assessee and an intimation to this effect shall be sent to the assessee.to this effect shall be sent to the assessee.

In case no sum is payable nor any refund is due the In case no sum is payable nor any refund is due the acknowledgment of the return will be deemed to be acknowledgment of the return will be deemed to be intimation. intimation.

No intimation can be sent after the expiry of two years No intimation can be sent after the expiry of two years from the end of the relevant A.Yr.from the end of the relevant A.Yr.

Scrutiny NoticeScrutiny Notice

Sec. 16(2):Sec. 16(2): Where a return has been Where a return has been made either u/s 14 or 15 or in response made either u/s 14 or 15 or in response to a notice u/s 16(4)(i), the A.O. If he to a notice u/s 16(4)(i), the A.O. If he considers it necessary or expedient to considers it necessary or expedient to ensure that the assessee has not ensure that the assessee has not understated his net wealth, may serve understated his net wealth, may serve on the assessee a notice requiring him on the assessee a notice requiring him to attend on a specified date and to to attend on a specified date and to produce or cause to be produced such produce or cause to be produced such evidence on which the assessee may evidence on which the assessee may rely in support of his return.rely in support of his return.

Scrutiny orderScrutiny order

Sec. 16(3):Sec. 16(3): then after hearing the then after hearing the evidences as the assessee may evidences as the assessee may produce and such other indences the produce and such other indences the A.O. may require the assessee to A.O. may require the assessee to produce and taking into account all produce and taking into account all relevant materials which the A.O. has relevant materials which the A.O. has gathered, the A.O shall by order in gathered, the A.O shall by order in writing assess the net wealth of the writing assess the net wealth of the assessee and determine the sum assessee and determine the sum payable by him.payable by him.

Wealth Escaping Assessment, Wealth Escaping Assessment, Section 17Section 17

If the assessing officer has reason to believe that If the assessing officer has reason to believe that the net wealth of any person has escaped the net wealth of any person has escaped assessment for any assessment year, he may be assessment for any assessment year, he may be subjected to the provisions of the act serve on subjected to the provisions of the act serve on such person a notice requiring him to furnish such person a notice requiring him to furnish within such period as specified in the notice, a within such period as specified in the notice, a return in the prescribed form and prescribed return in the prescribed form and prescribed manner setting forth the net wealth of such manner setting forth the net wealth of such person is assessable as on the valuation date person is assessable as on the valuation date mentioned in the notice.mentioned in the notice.

No action shall be taken under this sec after the No action shall be taken under this sec after the expiry of 4 years from the end of the relevant expiry of 4 years from the end of the relevant assessment year.assessment year.

Time Limit For Completion Of Time Limit For Completion Of Assessment Or Reassessment, Sec 17AAssessment Or Reassessment, Sec 17A

No order of assessment shall be made No order of assessment shall be made at any time after the expiry of 2 years at any time after the expiry of 2 years from the end of the assessment year from the end of the assessment year in which the net wealth was first in which the net wealth was first assessable.assessable.

No order of assessment or No order of assessment or reassessment shall be made under sec reassessment shall be made under sec 17 after the expiry of one year from 17 after the expiry of one year from the end of the financial year in which the end of the financial year in which the notice under sec 17(1) was served.the notice under sec 17(1) was served.

Reference to Valuation OfficerReference to Valuation Officer

Audit check pointsAudit check points

Most of the Audit objections originates Most of the Audit objections originates from Income tax assessmentsfrom Income tax assessments

Assets in IT records to be closely Assets in IT records to be closely watchedwatched

Rent incomes are to be specially Rent incomes are to be specially consideredconsidered

Exemption for one house- not to be Exemption for one house- not to be given to companiesgiven to companies

Valuation Done under section 55A of ITValuation Done under section 55A of ITTHANKS

Wealth tax act,1957.bose

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Transcript of Wealth tax act,1957.bose