Wealth Tax

The levy of Wealth-tax is abolished from assessment year 2016-17 onwards.

Scheme/Scope/Rates

Assessees liable to Wealth-tax (Section 3)

Wealth-tax is charged for every assessment year in the hands of individuals, HUFs and all companies (private as well as public) on the net wealth as on 31st March.

The following assessees are specifically excluded from the levy of Wealth Tax:

Company registered u/s. 25 of the Companies Act, 1956

Co-operative society

Social club

Political party

Mutual fund specified u/s. 10(23D) of the Income-tax Act.

Reserve Bank of India incorporated under Reserve Bank of India Act, 1934 (Inserted by Finance Act, 2012 w.r.e.f. 1-4-1957)

Charge of Wealth Tax

Wealth tax is levied only on the value of those assets (including deemed assets but excluding exempt assets) as defined u/s. 2(ea) after deduction therefrom of the debts which are incurred in relation to such assets (Liability towards Wealth Tax is not an allowable debt from A.Y. 1993-94) (Circular No. 663 dated
28-9-1993).

Assets shall mean

Description of Assets		Exclusions
a.	Any building or land appurtenant thereto, residential or commercial purpose (including a farmhouse and a guest house within twenty-five kilometres of municipal limits)	In case of a Company, a house meant exclusively for residential purpose and allotted to an employee, officer or a Whole time Director whose gross annual salary is less than – ₹ ten lakhs. (w.e.f. A.Y. 2013-14) House (residential or commercial) held as stock-in-trade. House occupied for purpose of business/profession carried on by the assessee. Residential property let out for at least 300 days in previous year. Commercial establishments or complexes
b.	Motor cars	Used for the business of running them on hire or as stock-in-trade
c.	Jewellery, bullion and furniture, utensils or any other article made of gold, silver, etc.	When used by the assessee as stock-in-trade. Gold Deposit Bonds issued under Gold Deposit Scheme, 1999
d.	Yachts, boats and aircraft	When used by the assessee for commercial purposes
e.	Urban Land being land situated, in any area within the jurisdiction of a municipality constructed with the (by whatever name called) or a Cantonment Board with a population of not less than ten thousand as per last preceding census; or in an area within a distance of not more than two kilometres measured aerially from local limits of municipality or Cantonment Board as above and has a population exceeding ten thousand but not more than one lakh as per last preceding Census; or in an area within a distance of not more than six kilometres (measured aerially) from local limits of municipality or Cantonment Board as above and has a population exceeding one lakh but not more than ten lakhs as per last preceding Census; or in an area within a distance of not more than eight kilometres (measured aerially) from local limits of municipality or Cantonment Board as above and has a population of more than ten lakhs as per last preceding Census; or	Land on which construction is not permissible Land occupied by any building constructed with the approval of the appropriate authority Unused land held for industrial purpose of 2 years from the date of acquisition Land held as stock-in-trade for a period of from the date of acquisition
f.	Cash in hand In case of individuals/HUFs: in excess of ₹ 50,000 In other cases: an amount not recorded in the books of account	— —

Scope (Section 6)

Status	Assets Includible	Debts Deductible
Resident and Ordinarily Resident
Citizen	All assets in or outside India	All Permissible Debts in or outside India
HUF–Ordinarily Resident	As above	As above
Company–Resident	As above	As above
Non-Citizen	All assets in India	All Permissible Debts in India
Resident but not Ordinarily Resident
Citizen/Non-Citizen	All assets in India	All Permissible Debts in India
Non-Resident
Citizen	As above	As above
Non-Citizen	As above	As above

Rates

Wealth Tax is charged in respect of Net Wealth of every Individual, HUF and Company @ 1% of the amount by which the Net Wealth exceeds ₹ 30 lakhs.

Deemed Assets : Section 4

The value of assets mentioned below shall be clubbed as provided herein under:

	Description of Assets		Exclusion from clubbing	Clubbed with
i)	Assets transferred by individual to spouse for inadequate consideration.	i)	Assets transferred in connection with an agreement to live apart	Net Wealth of Individual
ii)	No husband-wife relationship at time of transfer as well as on valuation date
ii)	Assets transferred by individual for immediate or deferred benefits of individual or spouse to other persons or Association of person for inadequate consideration.		No husband-wife relationship at time of transfer as well as on valuation date	Net Wealth of Individual
iii)	Assets held by minor child	i)	Assets held by Minor Married Daughter	Net Wealth of parent whose net wealth is higher, if marriage subsists or else in hands of the parent who maintains minor child.
		ii)	Assets acquired out of Minor’s Income as referred to in proviso to Section 64(1A)
		iii)	Minor attains on or majority before valuation date
		iv)	Assets held by a physically or mentally handicapped minor child
iv)	Assets transferred by Individual under Revocable Transfer to other persons or A.O.Ps		Assets transferred under Irrevocable Transfer	Net Wealth of Individual
v)	Assets transferred by Individual to son’s wife for inadequate consideration.	i)	No father-in-law/mother-in-law/daughter-in-law relationship at time of transfer as well as on valuation date	Net Wealth of Individual
ii)	Assets transferred prior to 1-6-1973
vi)	Assets transferred by Individual for immediate or deferred benefits of individual or son’s wife or both to other persons or A.O.Ps for inadequate consideration.	i)	No father-in-law/mother-in-law/ daughter-in- law relationship at time of transfer as well as on valuation date	Net Wealth of Individual
ii)	Assets transferred prior to 1-6-1973
Note : Any accretion to the transferred assets or accumulated income of the transferred assets will not attract the clubbing provisions.
vii	Assets transferred/converted by individual into joint family property.	i)	Assets transferred for adequate consideration	i) Net Wealth of Individual
		ii)	Conversion or gifts effected prior to 31-12-1969	ii) On Subsequent Partition of HUF — Share of spouse in converted property to be included in net Wealth of Individual.
viii	Gifts by book entries		Money actually delivered at time of entry.	Net Wealth of Individual
ix	Value of House/part thereof leased/allotted to Individual by Co-op. Society net of outstanding Instalment payable to Society.		None	Net Wealth of Individual
x	Possession of building taken/retained in part performance of contract (S. 53A of the Transfer of Property Act) or right with respect to building acquired by transaction u/s. 269UA(f) of I.T. Act.		None	Net Wealth of Individual
xi	Holders of Impartial Asset Estate		None	Net Wealth of Individual

Specific Exemptions — Section 5

Any assets held by public charitable/religious trusts. Exemption however lost and trust property liable to tax in case of diversion of income/property of trust to specified persons or in case of investment in unapproved securities.

Interest of a member in a HUF property

Any one building used for the residence by a former ruler

Any heirloom jewellery in the possession of a Ruler

Assets brought within 1 year prior to return/at any time after return into India by a returning NRI for 7 successive A.Ys. after return to India. Balance in N.R.E. a/c on date of return and assets purchased therefrom also exempt.

One house or part of a house (effective from A.Y. 1994-95) or a plot of land not exceeding 500 square metres (effective from A.Y. 1999-2000), belonging to an individual or an HUF.

Partition of HUF — Sections 20 and 20A

In case of HUF, if total partition takes place on valuation date itself, then for that assessment year, it will be assessed as if no such partition has taken place. Likewise, a partial partition in the H.U.F. effected after 31-12-1978 will not be recognised and H.U.F. will continue to be assessed as if no partition has taken place.

Interest for default in furnishing return — S. 17B

Mandatory interest is payable @ 1% for every month/part of a month from due date till date of furnishing of return or, as the case may be, date of completion of best-judgment assessment u/s. 16(5), on tax payable on net wealth determined on regular assessment. Levy of interest is not dependent upon reasonable cause for such a default. The mandatory interest is payable along with self-assessment tax before filing of the return of wealth.

Valuation of Assets — Section 7

Valuation of assets specified in S. 2(ea) other than cash are governed by provisions of S. 7(1). Value as on valuation date will be determined as per Schedule III of the W.T. Act.

A. Immovable Property — (Rules 3 to 8, Sch. III, Part B)

1Determine gross maintainable rent (GMR) as follows:

If property is let out:

Higher of

Annual rent received/receivable by the owner

Annual value as assessed by local authority

If property is not let out:

Situated within jurisdiction of a local authority	Situated outside jurisdiction of a local authority
Annual rent assessed by the local authority	Amount owner can reasonably be expected to receive as annual rent had the property been let out.

Determine net maintainable rent (NMR) as follows:

Deduct the following from GMR

taxes levied by any local authority in respect of property (deductible on accrual basis). This deduction is available even if taxes are to be borne by the tenant; and

15% of GMR.

Capitalise NMR as follows:

	Property situated on	Multiply NMR by
(a)	Freehold Land	12.5
(b)	Leasehold Land (unexpired period of lease is 50 years or more)	10
(c)	Leasehold Land (unexpired period of lease is less than 50 years)	8

	Value	Exception
Property acquired/constructed after 31-3-1974	Capitalised NMR as provided hereinabove or Actual Cost (including cost of improvement) whichever is higher	For one house used wholly for residential purposes and cost thereof up to ₹ 50 lakhs (in Delhi, Kolkata, Mumbai & Chennai) or ₹ 25 lakhs (in other cities), the value is Capitalised N.M.R.
Property acquired/constructed on or prior to 31-3-1974	Capitalised N.M.R.	None

B. Valuation of assets of business (Rule 14, Para D, Schedule 3)

In case accounts of the business are maintained regularly, value of assets as disclosed in the balance sheet shall be taken as follows:

ASSETS	VALUE TO BE TAKEN
a) Depreciable assets	Written down value
b) Non-depreciable assets	Book Value
c) Closing Stock	Value adopted for the purpose of income-tax

If value of any asset determined as per provisions of Schedule III exceeds value as per above table by more than 20%, then higher value shall be taken as value of the asset.
Value of assets not disclosed in balance sheet to be determined as per provisions of Schedule III.
Value of following assets disclosed in balance sheet not to be taken into account.

Advance tax paid under Income-tax Act.

Bad debts allowed as deduction u/s. 36(1)(vii) of Income-tax Act.

Asset in respect of which Wealth Tax is not payable.

Debit balance in Profit & Loss account, or any other amount which does not represent value of any asset.

Asset not really pertaining to the business.

Value of following liabilities disclosed in balance sheet not to be taken into account:

Capital employed in the business other than attributable to borrowed money.

Reserves by whatever name called.

Any provision made for meeting any failure or contingent liability

Liability not really pertaining to the business.

Debt utilised for acquiring asset in respect of which Wealth Tax is not payable.

C. Jewellery: (Rule 18, Part G, Schedule III)

For first Assessment Year:

Find out Fair Market Value (FMV) as on the valuation date and declare in Return.

FMV = Price fetched if sold in open market.

If FMV does not exceed ₹ 5 lakh, support Return by Statement in prescribed form. (O-8A)

If FMV exceeds ₹ 5 lakh, support Return by Registered Valuer’s Report, in prescribed form. (O-8)

For subsequent four assessment years:

Substitute price of gold, silver or alloy obtaining on the respective valuation date.

Add/Deduct value of new Purchases/Sales.

D. Value of interest in Firm or AOP (Rule 16, Part E, Schedule III)

Determine net wealth of the firm or AOP.
Allocation amongst partners/members.

Portion of net wealth of firm/AOP	Allocation to partners/ members
a) That portion which is equal to the amount of capital of firm/AOP	Proportion in which capital is contributed by them.
b) Residue	Ratio in which assets will be distributed in the event of dissolution of firm/AOP as per agreement of partnership/AOP. (If no agreement, use profit sharing ratio)

E. Value of life interest (Rule 17, Part F, Schedule III)

Determine average net annual income (ANAI) derived from the life interest during three years ending on the valuation date. Expenses incurred on the collection of such income (subject to a maximum of 5% of average of annual gross income) shall be deducted.
Value of life interest = ANAI x [1 / (P+D) – 1]

Where,

P = Annual premium for a whole life insurance without profit on the life of the tenant for unit sum assured as specified in the Appendix to Schedule III.

D = 6.5/106.5

Time limit for issuance of Notice for re-opening of assessment

Time limit for issuance of notice under section 17(1A), extended up to 16 years, where any net wealth in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment. The amendment will take effect from 1st July, 2012.

Penalty

Default	Minimum ₹	Maximum ₹	Section
Failure to comply with Notices u/ss. 16(2) and (4)	1,000	25,000	18(1)(b)
Concealment of the particulars of assets or furnishing inaccurate particulars of assets or debts	Tax sought to be evaded	Five times of such tax	18(1)(c)
Refusal to answer any question	500	10,000	18A(1)(a)
Refusal to sign any statement made in course of any proceedings	500	10,000	18A(1)(b)
Omission to attend to give evidence or to produce books of account or documents [summons u/s. 37(1)]	500	10,000	18A(1)(c)
Failure to furnish statement or information on points specified in notice u/s. 38	100 per day	200 per day	18A(2)
Committing default in payment of tax, interest or penalty	Nil	Amount in arrears	32

Rates of Gold and Silver

Valuation Date	Gold (per 10 gms.)(₹)	Silver (per 1 kg.)(₹)
01-04-1981	1,670	2,715
31-03-1982	1,645	2,680
31-03-1983	1,800	3,105
31-03-1984	1,975	3,570
31-03-1985	2,130	3,955
31-03-1986	2,140	4,015
31-03-1987	2,570	4,794
31-03-1988	3,130	6,066
31-03-1989	3,140	6,755
31-03-1990	3,200	6,463
31-03-1991	3,466	6,646
31-03-1992	4,334	8,040
31-03-1993	4,140	5,489
31-03-1994	4,598	7,142
31-03-1995	4,680	6,335
31-03-1996	5,160	7,346
31-03-1997	4,725	7,345
31-03-1998	4,045	8,560
31-03-1999	4,235	7,615
31-03-2000	4,380	7,900
31-03-2001	4,190	7,215
31-03-2002	5,010	7,875
31-03-2003	5,310	7,695
31-03-2004	6,065	11,770
31-03-2005	6,180	10,675
31-03-2006	8,490	17,405
31-03-2007	9,395	19,520
31-03-2008	12,125	23,625
31-03-2009	15,105	22,165
31-03-2010	16,320	27,255
31-03-2011	20,775	56,900
31-03-2012	25,813	56,200
31-03-2013	29,605	54,775
31-03-2014	28,511	42,838
31-03-2015	26,220	37,210
31-03-2016	28,580	36,525

Gift Tax

The provisions of the Gift-tax Act have ceased to apply w.e.f. 1st October, 1998. Hence, gifts made after that date are not subject to Gift-tax.