Topic :- wealth tax

Submitted to :- Mr. Devesh sir

Submitted by :- Palak khandelwal

Roll No :- 1505470034
 Wealth tax
TheWealth Tax Act, 1957was anActof theParliamentofIndiawhich
provides for levying of wealth tax on an individual,
HinduUndividedFamily(HUF) or company is in possession of, on the
correspondingValuationDate.

The Act applies to the whole of India including the state of Jammu and
KashmirandtheUnionTerritories.

TheapplicationoftheActhasbeendiscontinuedfrom1April2016.

WealthtaxwasabolishedintheUnionBudget(2016-2017)presentedby
UnionFinanceMinisterofIndiaMr.ArunJatelyon28-Feb-2015.

The wealth-Tax was replaced with additional surcharge of 2 per cent on

superrichwithataxableincomeofover`1croreannually
 ASSETS Sec.2 (ea)
1) Building Sec.2 (ea) :-
(I)Anybuildingorlandappurtenanttheretou/s2(ea)(I)istreatedasanassetandit
includes:
a)Commercialbuilding
b)Residentialbuilding
c)Anyguesthouse
d)Afarmhousesituatedwithin25kilometersfromthelocallimitsofalocal
authority
However following buildings are not treated as assets
a) Ahousemeantforresidentialpurposesisallottedbyacompanytoanemployeeor
anofficerorawholetimedirector,havingagrossannualsalaryoflessthan
Rs.5lakhs
b) Anyhouseforresidentialorcommercialpurposes,whichformspartofstockin-
trade
c) Anyhouseoccupiedbyassessesforthepurposesofhisownbusinessor
profession
d) Anyresidentialpropertythathasbeenletoutforaminimumperiodof300daysin
thepreviousyear208
e) Anypropertyinthenatureofcommercialestablishmentsorcomplexes
 2) Motor Cars Sec.2 (ea)
(ii)Anymotorcarisanassetexceptthefollowing:-
a)Motorcarsusedbytheassessesinthebusinessofrunning
themonhire
b)Motorcarsheldasstock-in-trade

3) Yachts, Boats and Aircrafts Sec 2(ea)

(iii)Yachts,boatsandaircraftsaretreatedasassets
excludingyachtsboatsandaircraftsusedbyassessesfor
commercialpurposes.
 4) Jewellery, Bullion, Utensils Of Gold, Silver etc. Sec. 2(ea)
(iv)Jewellery,bullionfurniture,utensilsoranyotherarticlemade
whollyorpartlyofgold,silver,platinum,oranyotherpreciousmetalof
anyalloycontainingoneormoreofsuchpreciousmetalsaretreatedasan
assetForthispurpose,thetermjewelleryincludes
a)Ornamentsmadeofgold,silver,platinumoranyotherpreciousmetal
ofanyalloycontainingoneormoreofsuchpreciousmetals,whetheror
notcontaininganypreciousorsemipreciousstone,whetherornotsetin
anyfurniture,utensils,orotherarticlesorworkedorsewnintoany
wearingapparel.

b)Preciousorsemipreciousstones,whetherornotsetinanyfurniture,
utensilsorotherarticlesorworkedorsewnintoanywearingapparel
However,thetermjewelryshallnotincludetheGoldDepositBonds
issuedunderGoldDepositScheme,1999notifiedbytheCentral
Government

However,ifanyoftheabovestatedassetsareheldbytheassesses
asstock-intrade,thenitisnottreatedasanasset
 5) Urban Land Sec 2(ea)
(v)Urbanlandistreatedasanassetandurbanlandmeanslandsituated
a)inanyareawhichiscomprisedwithinthejurisdictionoflocal
authorityandwhichhasapopulationofnotlessthantenthousandaccording
tothelastprecedingfiguresofcensusofwhichtherelevantfigureshavebeen
publishedbeforethevaluationdate;or
b)isanyareawithinsuchdistance,notbeingmorethan8kilometer
fromthelocallimitsofthelocalauthorityasthecentralgovernmentmay,
havingregardtotheextent,andscopeforurbanizationofthatareaandother
relevantconsiderations,specifiedinthisbehalfbynotificationintheofficial
gazette.
Howeverlandisnottreatedasassetinthefollowingcases:
a)Landonwhichconstructionofabuildingisnotpermissibleunderanylaw
forthetimebeinginforceintheareainwhichsuchlandissituated;
b)Landoccupiedbyanybuildingwhichhasbeenconstructedwithapprovalof
theappropriateauthority;
c)Anyunusedlandheldbytheassessesforindustrialpurposesforaperiodof
twoyearsfromthedateofacquisitionbyhim
d)Landheldbyanassessesasstock-in-tradeforaperiodof10yearsfromthe
dateofitsacquisitionbyhim.
 6) Cash-in-hand Sec 2(ea)
(vi)209Followingistreatedasanassets:
a)IncaseofanyindividualandHUF,cashin
handonthelastmomentofthevaluationdatein
excessof50,000shallbetreatedasasset
b)Incaseofanyotherpersonanyamountnot
recordedinthebooksofaccountsshallbetreatedas
asset.
 Charge of wealth tax
Wealth tax is chargeable on the following basis:

Wealth tax is chargeable only on case of there categories of person i.e.

individual,HUFandcompany.
Wealthtaxischargeable@1%onthenetwealthexceedingRs.30,00,000.
Netwealthoftheassessesistobecomputedasonthevaluationdatei.e.,
on31stMarch,immediatelyprecedingtherelevantassessmentyear.
Netwealthistobecomputed:

I)Incaseofindividualonthebasisofhisnationalityandresidential
statusofthepreviousyearendingonthevaluationdate.
II)IncaseofHUFandcompanyonthebasisofitsresidentialstatus
ofthepreviousyearendingonthevaluationdates.
 ProcedureforcomputationofWealthtax.

Wealth tax is chargeable @1% of the amount by

whichnetwealthexceeds15lacrupees,hence
IfnetwealthisuptoRs.15lac,therewillnotbeany
wealthtax.
IfnetwealthexceedsRs.15lac,
wealthtaxiscalculatedas:
WealthTax=1%[NetWealthRs15Lac]
 Calculation on wealth tax
Wealth tax is calculated at the rate of 0.25 per cent of the
amountofnetwealththatexceedsRs.50lakhonthevaluation
date.

Thenetwealthofanassessesincludesthevalueofspecified
unproductiveassetsonthevaluationdateaftersubtractingthe
debttheassessesowesonthesaidassets.

WealthtaxdoesnotattractanyEducationCessorsurcharge.
 Exceptions
Wealth Tax is not applicable to :-
Trusts
ArtificialJudicialPersons
Partnershipfirms
Associationofpersons(AOPs)
A company registered under Section 25 of the Company Act,
1956
Co-operativeSocieties
Socialclubs
Politicalparties
Mutualfundsspecified under Section 10 Clause (23D) of the
IncomeTaxAct
 COMPUTATIONOFNETWEALTHANDWEALTHTAX

Procedureforcomputationofnetwealthisasfollows:

Computation of Net wealth of the Rupees

assesses.
Assetsownedbyassesseson X
valuationdateincludingdeemed
assetsandexcludingexemptassets

LessDeductibledebtsowedby (Y)
assessesonthevaluationdate.

NetWealth X-Y
 Assessment under section 143(1)
Thisisapreliminaryassessmentandisreferredtoassummaryassessmentwithout
callingtheassesses(i.e.,taxpayer).

Scope of assessment under section 143(1)

Assessmentundersection143(1)islikepreliminarycheckingofthereturnofincome.
Atthisstagenodetailedscrutinyofthereturnofincomeiscarriedout.Atthisstage,
thetotalincomeorlossiscomputedaftermakingthefollowingadjustments(ifany),
namely:-
(I)anyarithmeticalerrorinthereturn;or
(ii)anincorrectclaim(*),ifsuchincorrectclaimisapparentfromanyinformationin
thereturn;

Fortheabovepurposeanincorrectclaimapparentfromanyinformationinthereturn
meansaclaimonthebasisofanentryinthereturn:
(I)ofanitemwhichisinconsistentwithanotherentryofthesameorsomeother
iteminsuchreturn;

(ii)inrespectofwhichtheinformationisrequiredtobefurnishedundertheActto
substantiatesuchentryandhasnotbeensofurnished;or

(iii)inrespectofadeduction,wheresuchdeductionexceedsspecifiedstatutorylimit
whichmayhavebeenexpressedasmonetaryamountorpercentageorratioorfraction;
 Procedure of assessment under section 143(1)
Aftercorrectingarithmeticalerrororincorrectclaim(ifany)as
discussedabove,thetaxandinterest,ifany,shallbecomputedonthe
basisoftheadjustedincome.
Anysumpayablebyorrefundduetothetaxpayershallbeintimated
tohim.
Anintimationshallbepreparedorgeneratedandsenttothetaxpayer
specifyingthesumdeterminedtobepayableby,ortheamountof
refundduetothetaxpayer.
Anintimationshallalsobesenttothetaxpayerinacasewherethe
lossdeclaredinthereturnofincomebythetaxpayerisadjustedbut
notaxorinterestispayablebyornorefundisduetohim.
Theacknowledgementofthereturnofincomeshallbedeemedtobe
theintimationinacasewherenosumispayablebyorrefundableto
theassessesorwherenoadjustmentismadetothereturnedincome.
Theprocessingofareturnundersection143(1)shallnotbenecessary,
whereanoticehasbeenissuedtotheassessesundersection143(2),
i.e.,anoticeforscrutinyassessmenthasbeenissuedtothetaxpayer.
 Wealth tax on closely held companies
Closelyheldcompaniesisapublicitytraded
companyinwhichasmallgroupof
shareholdercontrolthemajorityoftheshares.
Thesemajorityshareholderstendtoholdon
thecompanysstockandassuchonlyminority
sharesaretraded,leadingtolighttradevolume
Closelyheldcompaniesare,bytheirnature,
resistanttohostiletakeoverandproxywars.
 Revival of levy of wealth tax in the case
of closely held companies are.

Wealthtaxshallbechargedunderthewealthtaxact
foreveryassessmentyearcommencingonandfrom
the1stdayofApril,1984inrespectofthenetwealth
onthecorrespondingvaluationdateofevery
company,notbeingacompanyinwhichthepublic
aresubstantiallyinterestsattherateoftwo%of
suchnetwealth.
Forthepurposeofsub-section(1)thenetwealthofa
companyshallbetheamountbywhichtheaggregate
valueofalltheassetsreferredtosub-section(3)