"Wealth Tax An Easier Way"
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.