WEALTH TAX ACT,1957

1
WEALTH TAX ACT,1957
2
Charge Of Tax
3
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.

4
Who Is An Individual
5
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.

6
Who Is Not An Individual

• A company.

7

• A corporation established by state or central
  acts.
• A co-operative society.

8
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.

9
What Is A Company
10
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).

11
What Is An Asset Section 2(ea)

• Any building or land appurtenant thereto whether
  used for residential or commercial purpose.

12

• Motor cars (other than used by assessees in
  business).

13

• Jewellery,
• Bullion
• Furniture
• Utensils or any other article made wholly and
  partly of gold, silver, platinum or any other
  precious metal.

14

• Yachts, boats aircraft. (Note - Helicopter is
  not covered under aircraft)

15

• Urban land.

16

• Cash in hand in excess of Rs.50,000.

17
Incidence Of Wealth Tax

• The liability of wealth tax depends upon the
  citizenship residential status.
• For HUF, it depends totally upon residential
  status.

18
Individual, Not A citizen Of India
19
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.

20
An Individual, Citizen And Resident In India
21
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.

22
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.

23
HUF, RNOR NRI
24
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.

25
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.

26
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.

27
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.

28
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).

29

• 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)

30
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.

31
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.

32

• Following assets are not included
• Assets exempt under sec 5(1).
• Asset lost, destroyed or stolen on or before
  valuation date.

33
What Is Debt?
34
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.

35
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.

36
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.

37
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.

38
Conclusion
39
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.