Mukesh Patel.in
practical tax & investment planning online
international tax expert / columnist / author / speaker

CHECK YOUR WEALTH TAX LIABILITY

With current prices of gold, silver & motor cars its worth taking a look if you are liable to wealth tax

There was a time when everything was taxable under Wealth-tax, excepting specific exemptions provided for the purpose. Under the current provisions, only six kinds of assets are treated as taxable, thereby exempting all other assets from the scope of Wealth-tax.

With effect from Assessment Year 1993-94, the basic exemption limit for Wealth-tax applicable for Individuals, Hindu Undivided Families and Companies was steeply raised from Rs.2,50,000 to Rs.15,00,000 and the rate of tax was fixed at a flat rate of 1% as compared to the earlier graded tax system.

It took the Finance Minister nearly 17 years to review the basic exemption limit. With effect from the valuation date 31st March 2010, relevant to Assessment Year 2010-11, the said exemption limit was revised from Rs.15,00,000 to Rs.30,00,000.

What is significant to note, is that prior to Assessment Year 1993-94, everything was taxable under Wealth-tax, excepting specific exemptions provided for the purpose.  However, under the current provisions, only six kinds of assets are treated as taxable, thereby exempting all other assets from the scope of Wealth-tax.

ASSETS LIABLE TO WEALTH-TAX

The following six kinds of assets considered to be unproductive assets, have been made liable to Wealth-tax:

  •   Any building or land appurtenant thereto, including a residential house, guest house or farm house. However, the following houses have been specifically excluded from the net of Wealth-tax:

  • A residential house allotted by a company to an employee or director drawing a   gross annual salary of less than Rs.10,00,000.

  • Any house for residential or commercial purpose held as stock in trade.

  • Any house occupied by the taxpayer for the purpose of his business or profession.

  • Any residential property let out for a minimum period of 300 days in the previous year.

  • Any property in the nature of commercial establishments or complexes.

    • Motor cars, excluding those used for the business of running them on hire or held as stock in trade.

    • Jewellery and ornaments including articles made of precious metals or stones, but excluding items held as stock in trade.

    • Yachts, boats and aircrafts, excluding those used for commercial purposes.

    • Urban land. It has been clarified that urban land would mean land situated in any area within the municipal limit and also within a range of upto 8 kms. from the municipal limit, such distance being determined on the basis of notification by the Central Government keeping in view the urban development within that area. Moreover, it has been also clarified that urban land would not include the following:

    • Land on which construction of building is not permissible under any law, e.g. ULC Act, Green Belt Regulations, Agricultural Zone etc.

    • Unused land held for industrial purpose upto a period of two years from the date of its acquisition.

  • Cash in hand in excess of Rs.50,000 in the case of Individuals and Hindu Undivided Families. In other cases, any amount not recorded in the books of account would be treated as liable to Wealth-tax.

EXEMPTION FOR ONE HOUSE PROPERTY

Under Section 5 of the Wealth-tax Act, a special exemption has also been granted in respect of one house property or a plot of land not exceeding 500 sq. mtr. belonging to an individual or an HUF. Accordingly, though a self occupied residential house or an open plot of land are otherwise liable to Wealth-tax as seen hereinbefore, total exemption is available in regard to the value of one such house or a plot of land not exceeding 500 sq.mtr.

Leave a Reply

You must be logged in to post a comment.

Powered by Epaperz.com | Hosted at HostADomainNow.com