What is Wealth Tax?
If i have to define Wealth Tax then i will say that its a direct tax on rich and the most ignored tax bucket by taxpayers in India :). Its basically a tax on the assets/wealth owned by you which are non-productive in nature. It is calculated for Indian Financial Year from 1st April to 31st March. The weird logic to levy this tax is to bring equality in society.
Who is Liable to Pay Wealth Tax?
Any individual or HUF (Hindu Undivided Family), whose cumulative wealth/assets exceeds 30 lacs is liable to pay wealth tax. Wealth Tax Return is filed separately from Income Tax Return.
What is Wealth Tax Rate?
Currently Wealth Tax is charged at 1%.
Definition of Wealth:
Income Tax Department has defined following asset class to be included for the purpose of calculation of Wealth Tax
1. Building or Land
2. Motor Car
3. Jewellery / Bullion
4. Air/Water Vehicles like Yachts, Boats, Aircraft etc
5. Cash in Hand (More than Rs 50,000)
Indian Citizens are liable to pay tax on their wealth spread across globe whereas as non-resident Indians are liable to pay wealth tax only for assets in India.
Wealth tax also include any assets transferred on revocable basis or without consideration to relatives in blood relation. All such wealth is included in individuals wealth. It does not include gift deed which is irrevocable transfer of asset.
Exclusions: Basically all productive Assets like
1. Mutual Funds
2. Savings Account / FD’s
3. Gold ETF
Valuation Date:
Last date of the Financial Year (i.e. 31st March) for which the Wealth Tax is to be paid.
Deduction:
Any debt on assets covered under Wealth Tax is reduced from the wealth tax. E.g. if you own house of 1 Cr with principal outstanding of 30 lacs then 30 lacs will be reduced from the total wealth or house will be valued for 70 lacs.
Wealth Tax Exemptions:
1. Self occupied residential house or plot of land which is less than 500 sq meter in dimension
2. Any property which forms part of Stock in Trade
3. Any house used for Business Purpose or Profession carried out by the taxpayer.
4. Commercial Complexes / Establishments
5. If taxpayer has more then 1 house property. The 2nd property is excluded from wealth tax if it is put on rent for 300 days or more during the financial year.
Penalty for Defaulting on Wealth Tax:
It depends on Income Tax Officer. You might be invited to become Government Guest for max 7 years (In jail) or penalty of upto 500%
I urge all Indians to pay the taxes honestly and live with peace of mind otherwise be careful when someone knocks your door. The tax collected is used for our welfare only & as a responsible citizen, we should pay tax on time.
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