Wealth Tax in India

Leave a missed Call on

94 8300 8300

Wealth tax in India is a part of direct taxes just like income tax. As Income tax is levied on the income you earn, Wealth tax in India is levied on wealth you have accumulated. As wealth itself is somewhat misinterpreted term so no middle class person calls itself wealthy and thus do not pay heed to wealth tax. But wealth has its own definition as per wealth tax act, 1957. This article is about understanding the basics of wealth tax in India , who should pay this and consequences of non-compliance. Did you know: If you evade wealth tax payments, then tax authorities may impose penalty of upto 500% of the Tax amount sought to be evaded and in extreme cases imprisonment of upto 7 years can be imposed

What is wealth tax in India?

Wealth tax in India is a tax levied on the specified unproductive assets in your assets/investment portfolio. Unproductive assets mean those assets which don't generate any income (taxable or non-taxable). Like Jewellery, Land, Second house property which is not let out etc. If you are Indian national and resident as per tax laws, you will have to pay tax on your global assets too.

Every individual and HUF has to pay wealth tax @1% if the wealth exceeds Rs 30 lakh and file wealth tax return by 31^st July immediately following the end of financial year. However date of filing return may vary in cases where the accounts are required to be audited. Also keep in mind that this tax is on per year basis.

What assets constitute wealth as per wealth tax in India?

Below are the assets details as defined as wealth under wealth tax act.

Basically wealth has been divided in 6 types – House, Motor cars, Jewelry, Air/Water vehicles and Land and even cash in excess of Rs 50,000/- . As I mentioned above that this tax is on unproductive assets. So if you have cash of Rs 2 lakh in hand and is not generating any return (taxable or non taxable) then this will be treated as your wealth and falls in the purview of wealth tax. All mutual funds, Fixed deposits, Exchange traded funds, Insurance policies etc. does not fall under wealth tax act. But,

if you have second house which is not let out for 300 or more days then the value of that house becomes a part of your wealth, If you have farm house situated within 25 km of municipality limits then also it becomes your wealth,

Motor cars if not being used for business purpose is a part of your wealth

Jewelry includes jewelry, bullion, furniture, utensils, or any other article made up of gold, silver, platinum or any other precious metal, unless it is being used for business purpose and is a part of stock in trade. It does not include gold deposit bonds issued under gold deposit scheme.

Yachts, Boats, Aircrafts if not being used for business purpose

Urban land unless construction on that land is not permissible by law, or is held by assesse for industrial purposes for a period of 2 years from the date of acquisition

Do note that wealth tax is always levied on the net assets, which means that if any kind of loan was taken to buy that asset then that loan amount will be deducted from the total value of assets.

Also keep in mind that it also includes all those assets which are transferred by you to your wife, minor child or to son's wife or any other person or association of person without any adequate consideration.

Do NRIs also have to pay wealth tax in India?

Yes, NRIs are also subject to wealth tax for the Assets purchased in India. However there's one exception here. If NRIs are coming back to India for good, bring along with some assets or purchase the assets as defined in the wealth tax act from the money they brought from the country of their residence, that money and purchases are exempt from this law. But the condition is that they have to make the purchases within 1 year prior to the date of return/comeback or at any time thereafter. The exemption is available for 7 successive assessment years from the date of return to India.

Valuation of Assets and Computation of wealth tax in India

Valuation date for Assets comes under wealth tax purview is the last day of previous year i.e 31^st March. Here's how you can compute your wealth tax:


		Details		Amount

A	Value of Assets belonged to Assesse ( including those given to family members without adequate consideration)		-

B	Assets exempted under Wealth tax act		-

C	Gross wealth (A-B)		-

D	Debts/Loans belonged to Assets under Gross Wealth		-

E	Net Wealth (C-D)		-

F	Exemption Limit		30 lakh

	Wealth Chargeable to Tax @ 1% (E-F)		-

Conclusion:

As they say ignorance is no excuse and this applies to Wealth tax also. If you think that you fall under the purview of wealth tax but have been avoiding or evading just under the pretext of ignorance, then get up and do the calculations as per the table above , You may take a professional help who may also help you in some tax planning and reduction in your tax liability.

For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call

Leave a missed Call on 94 8300 8300

Leave your comment with mail ID and we will answer them

You can write back to us at

PrajnaCapital [at] Gmail [dot] Com

---------------------------------------------

Invest Mutual Funds Online

Invest Any Mutual Fund Online

Download Mutual Fund Application Forms from all AMCs

Download Mutual Any Fund Application Forms

---------------------------------------------

Best Performing Mutual Funds

Largecap Funds Invest Online

DSP BlackRock Top 100 Fund

ICICI Prudential Focused Blue Chip Fund

Franklin India Bluechip

ICICI Prudential Top 100 Fund

B. Large and Midcap Funds Invest Online

ICICI Prudential Dynamic Plan

HDFC Top 200 Fund

UTI Dividend Yield Fund

Birla Sun Life Front Line Equity Fund

Franklin India Prima

C. Mid and SmallCap Funds Invest Online

Reliance Equity Opportunities Fund

DSP BlackRock Small & Midcap Fund

Sundaram Select Midcap

IDFC Premier Equity Fund

Birla Sun Life Dividend Yield Plus

SBI Emerging Businesses Fund

HDFC Mid-Cap Opportunities Fund

ICICI Prudential Discovery Fund

D. Small and MicroCap Funds Invest Online

DSP BlackRock MicroCap Fund

2.Franklin India Smaller Companies

E. Sector Funds Invest Online

Reliance Banking Fund

Reliance Banking Fund

ICICI Prudential Banking and Financial Services Fund

F. Tax Saver Mutual Funds Invest Online

1. ICICI Prudential Tax Plan

2. HDFC Taxsaver

DSP BlackRock Tax Saver Fund

Reliance Tax Saver (ELSS) Fund

G. Gold Mutual Funds Invest Online

Relaince Gold Savings Fund

ICICI Prudential Regular Gold Savings Fund

HDFC Gold Fund

Birla Sun Life Gold

H. International funds Invest Online

1. Birla Sun Life International Equity Plan A

2. DSP BlackRock US Flexible Equity

3. FT India Feeder Franklin US Opportunities

4. ICICI Prudential US Bluechip Equity

5. Motilal Oswal MOSt Shares NASDAQ-100 ETF

Understanding Your Cibil Credit Information Report

WE ARE all familiar with the anxiety and uncertainty that we feel when applying for a loan. After all, it's the lender who decides whether we can own our dream home, our first car, or whether our children can pursue higher education. In a nutshell, a better life depends on the lender's decisions. While other factors do play a part in the lender's decision, the Cibil Credit Information Report ( CIR ) plays a crucial role in a lender's decision to approve a loan application. Previously, lenders would treat all loan seekers equally. Each applicant, if approved by the lender's internal credit policy, would be charged at the same interest rate for a particular loan size and purpose. The lenders would charge a higher interest rate to all the borrowers, in order to compensate for the possible default of a small portion of the loan disbursed. In other words, it's like a professor (the lender) punishing an entire class (borrowers) for the mischief played b...

Myths about Exchange Traded Funds (ETFs)

1) ETFs Are Similar to Individual Stocks: Like MFs, ETF consist of an underlying portfolio of securities that's designed to follow a specific index or investment strategy. Hence, they are as diversified as various mutual funds. 2) ETFs Only Invest in Equity: Since they are listed on the exchange, the general belief is that ETF only consists of equity asset class. Globally, ETFs are available across asset classes – equity, debt, commodities, real estate and so on. In fact, over the past couple of years, India has also seen the emergence of Gold ETFs. 3) All ETFs Are Index Funds: ETF started as a fund which used to track indices and hence they were branded as index funds that are listed. However, ETFs have progressed rapidly and are no longer associated only with passive index funds. Globally, we have seen the launch of actively-managed ETFs. In India, also we recently saw the emer gence of fundamentally-weighted ETFs on Nifty, which busts the myth that ETFs are index funds and can...

What are the factors affect the changes in Interest Rate of Fixed Deposits?

What are the factors affect the changes in rate of Fixed Deposits? Fixed Deposits are now considered to be a very old fashioned method of saving, but still attract many investors since they have guaranteed returns at the end of the tenure of the investment at a decent interest rate. There are various factors that affect the rates of interest for a Fixed Deposit. Policies of the Reserve Bank of India - The several norms and restrictions posed by the Reserve Bank of India , in order to gain optimum control over credit and inflow and outflow of fund throughout the country. The repo rate changes, cash reserve ration tends to change and these changes affect the banking products like Fixed Deposits, loans etc. Recession - When unemployment in a country crosses the benchmark set Recession hits, and slowly the country faces an economic slow movement, affecting the purchasing power of the people in the country, forcing the Reserve Bank of India to release more funds in the financial marke...

REC Tax Free Bond Issue

Tax Saving Mutual Funds Online Current open Infra Bond Application form Download REC Tax Free Bond Application Forms REC (Rural Electrification Corporation) is going to issue tax free bonds and the issue will open on March 6 2012 and will close on the 12th of March 2012 When you buy 80CCF infrastructure bonds, the amount you invest in those bonds get reduced from your taxable income but in these bonds that's not going to be the case. The interest on these bonds will be tax free and they are similar to the other tax free bonds like the HUDCO, NHAI and PFC issues. For the two of you interested in knowing this – these bonds are tax free under Section 10(15)(iv)(h) of the Income Tax Act. Now on to the issue itself and let's start with the high credit rating that the issue has got. The REC tax free bond issue has been given the highest rating by all issuers since the government owns the majority stake (66.8%) in REC, it has been consistently profit making, this is a se...

Mutual Fund Review: ING Dividend Yield

ING Dividend Yield's small assets enable the fund manager to churn in impressive returns… Strategy The aim of the fund is to invest in stocks which offer a high dividend yield. This fund deploys a value based strategy which aims to gain from investing in fundamentally strong and free cash flow generating businesses. The scheme focuses not only on growth but also on the cash generated by the business, which mostly leads to stable returns even in volatile markets. This fund has a low volatility because of its investment in high yielding stocks. The scheme tries to include stocks that yield dividend above the dividend yield of the Nifty and stocks with liquidity, which throws up a universe of 150 stocks. Our View Launched in October 2005, this fund invests at least 65 per cent of its assets in high dividend yield stocks. The fund has consistently maintained a mix of stocks across varying market capitalisation, with a higher tilt to mid caps compared to small caps. Howev...

Invest in Tax Saving Mutual Funds	Download Any Applications
Transact Mutual Funds Online	Invest Online
Buy Gold Mutual Funds	Invest Now

Invest in Tax Saving Mutual Funds	Download Any Applications
Transact Mutual Funds Online	Invest Online
Buy Gold Mutual Funds	Invest Now

Prajna Capital - An Investment Guide

Search This Blog