Wealth Tax 1957 (in India)

7/23/2019 Wealth Tax 1957 (in India)

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WEALTH TAXWEALTH TAXBasically Wealth tax is chargeable toBasically Wealth tax is chargeable toNet wealthNet wealth Net wealth for this purpose isNet wealth for this purpose iscomputed as followscomputed as follows

Assets [u/s. 2 (ea)]Assets [u/s. 2 (ea)] --

+ Deemed assets (u/s-4)+ Deemed assets (u/s-4)

--TotalTotal

(-) Exempted assets (u/s-5)(-) Exempted assets (u/s-5)

--


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ExceptionsExceptions

If following conditions are satisfiedIf following conditions are satisfied

A house is not treated as AssetsA house is not treated as Assets

It is meant exclusively for residentialIt is meant exclusively for residential

purposespurposes

It is allotted by a company to anIt is allotted by a company to an

employee or an officer or a directoremployee or an officer or a director

who is in full time employmentwho is in full time employment

A house held as stock in tradeA house held as stock in trade

A house used for own business orA house used for own business or


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JEWELLERY, UTENSILSJEWELLERY, UTENSILS

OF GOLD, SILVER etc.OF GOLD, SILVER etc.

[u/s-2 (ea) (iii)][u/s-2 (ea) (iii)]Any of such article made fully orAny of such article made fully orpartially of gold, silver, platinum orpartially of gold, silver, platinum or

any other precious metalany other precious metaloror

Any alloy containing one or more ofAny alloy containing one or more of

such precious metalssuch precious metalsare treated asare treated as

assetsassets


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EXCEPTIONSEXCEPTIONS

1.1. Stock in trade not an assetStock in trade not an asset

4.4. Gold deposit bonds are notGold deposit bonds are not

assetasset


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BOATS and AIRCRAFTSBOATS and AIRCRAFTS

[u/s-2 (ea) (iv)][u/s-2 (ea) (iv)]

Boats & Aircrafts are treated asBoats & Aircrafts are treated asAssetsAssets

Other than those used by theOther than those used by theassessee for commercial purposeassessee for commercial purpose


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Continued..Continued..

Assets transferred for the benefit ofAssets transferred for the benefit of

sons wifesons wife

Interest of partnerInterest of partner

[u/s-4 (1) (b)][u/s-4 (1) (b)]

Conversion by an individual of hisConversion by an individual of his

self acquired property into jointself acquired property into joint

propertyproperty

Gifts by book entriesGifts by book entries

Property held by a member ofProperty held by a member of

housing societyhousing society


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ASSETS EXEMPT FROM TAXASSETS EXEMPT FROM TAX

(u/s-5)(u/s-5)

Property held under a trustProperty held under a trust

Interest in the property of HUF for aInterest in the property of HUF for a

family memberfamily member

Residential building of a former rulerResidential building of a former ruler

Former rulers jewelleryFormer rulers jewellery

Assets belonging to the IndianAssets belonging to the Indianrepatriatesrepatriates

Repatriate (send back to domesticRepatriate (send back to domestic

country)country)


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VALUATION OF ASSETSVALUATION OF ASSETS

[U/S-7][U/S-7]

1. Building (Part-B of schedule III)- Para1. Building (Part-B of schedule III)- Para

549.1549.1

Step 1:Step 1: Find out Gross maintainable rent i.e.Find out Gross maintainable rent i.e.

c)c) If property is let outIf property is let out Annual rent received or receivable by theAnnual rent received or receivable by the

ownerowner

OrOr Annual value of the property as assessed byAnnual value of the property as assessed by

local authoritylocal authority

Whichever is higherWhichever is higher


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Step 2:Step 2: Find out net maintainableFind out net maintainable

rentrent It is calculated by deductingIt is calculated by deducting

following fromfollowing from step 1step 1

b)b) The amount of taxes charged byThe amount of taxes charged by

any local authority in respect ofany local authority in respect ofpropertyproperty

AndAnd

d)d) A sum equal to 15% of grossA sum equal to 15% of grossmaintainable rentmaintainable rent


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Step 3: CAPITALIZATIONStep 3: CAPITALIZATION

Capitalization can be done by multiplying theCapitalization can be done by multiplying thenet maintainable rent by a decided factor asnet maintainable rent by a decided factor as

per follows:per follows:

In case of construction on lease hold landIn case of construction on lease hold land

factor should be 12.5factor should be 12.5

In case of the lease period of such land is 50In case of the lease period of such land is 50

years or more factor should be 10years or more factor should be 10 In case lease period is less than 50 yearsIn case lease period is less than 50 years

factor should be 8factor should be 8


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Calculation of PremiumCalculation of Premium

Excess of unbuilt area over specified areaExcess of unbuilt area over specified areaPremiumPremium

Not more than 5% of aggregate areaNot more than 5% of aggregate area NilNil

5% to 10% of aggregate area5% to 10% of aggregate area20%20%



More than 20% of aggregate areaMore than 20% of aggregate area Rules of part-BRules of part-B

Schedule IIISchedule IIINotNot


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Step 5:Step 5:DEDUCT UNEARNEDDEDUCT UNEARNEDINCREMENTINCREMENT

It is to deduct the amount ofIt is to deduct the amount ofunearned increment payableunearned increment payableIf property is built on leasehold landIf property is built on leasehold land

& any part of unearned increase in& any part of unearned increase in

value is payable to the governmentvalue is payable to the governmentor any authority at the time ofor any authority at the time oftransfer of the property, the value oftransfer of the property, the value of

such property will be reduced by thesuch property will be reduced by theamount liable to be so paid.amount liable to be so paid.


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2. Valuation of self occupied2. Valuation of self occupied

property -property -u/s-7 (2)u/s-7 (2)

It is applicable if following conditions areIt is applicable if following conditions are

satisfied.satisfied.

b)b) The assessee owns a house, being an The assessee owns a house, being an

independent residential unitindependent residential unitc)c) It is used by the assessee exclusively forIt is used by the assessee exclusively for

his residential purposes throughout 12his residential purposes throughout 12

monthsmonths

If these conditions are satisfied, theIf these conditions are satisfied, the

assessee can adopt anyone of theassessee can adopt anyone of the

followingfollowing


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3 V l ti f A t f3 Valuation of Assets of


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3. Valuation of Assets of3. Valuation of Assets of

BusinessBusiness

[Part D schedule III][Part D schedule III]a)a) Value of assets disclosed in BalanceValue of assets disclosed in BalanceSheetSheet

Step 1:Step 1:Find out followingFind out following

AssetsAssets ValueValue

Depreciable assetsDepreciable assets W.D.V.W.D.V.

Non depreciable assetsNon depreciable assets Book valueBook value

(other than stock in trade)(other than stock in trade)

Closing stockClosing stock ValueValue

adopted for theadopted for the


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Step 2Step 2

Add 20% the values given in aboveAdd 20% the values given in abovetabletable

Step 3Step 3

Find out the value of individual assetFind out the value of individual assetas per the provisions of schedule IIIas per the provisions of schedule III

Step 4Step 4

e)e) If the value of step 3 > step 2 thenIf the value of step 3 > step 2 thenthe amount of step 3 will be takenthe amount of step 3 will be taken

as valueas value

f)f) Else the value of step 1 will beElse the value of step 1 will be


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a)a) Value of assets not disclosed inValue of assets not disclosed in

Balance SheetBalance Sheet

The value of an asset not disclosed inThe value of an asset not disclosed in

the balance sheet shall be taken tothe balance sheet shall be taken to

be the value determined inbe the value determined in

accordance with the provisions oaccordance with the provisions of

schedule III as applicable to thatschedule III as applicable to that

asset.asset.


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Step 3:Step 3: Average net annual income shall beAverage net annual income shall bemultiplied by multiplier i.e.multiplied by multiplier i.e.

1/(p+d)-11/(p+d)-1

Where,Where,p = Annual premium for a whole life insurancep = Annual premium for a whole life insurance

without profit on the life of the life of tenant forwithout profit on the life of the life of tenant forunit sum assured.unit sum assured.

d = (i/1+i) as i being rate of interest which is 6.5%d = (i/1+i) as i being rate of interest which is 6.5% Thus the multiplier depends upon the premium Thus the multiplier depends upon the premiumfor unit sum assured and age of the personfor unit sum assured and age of the personhaving life interest. The multiplier i.e.having life interest. The multiplier i.e.

[1/(p+d)-1],[1/(p+d)-1],

for different age may be checked through a prefor different age may be checked through a precalculated tablecalculated table

i l blN i l P bl


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Numerical ProblemNumerical ProblemMr. A aged 40 years. His father settled aMr. A aged 40 years. His father settled a

house property in trust giving whole lifehouse property in trust giving whole life

interest to A.interest to A. The income form the property for the years The income form the property for the years

2005-06 to 2008-09 was 80000, 94000,2005-06 to 2008-09 was 80000, 94000,90000 and 96000 respectively90000 and 96000 respectively

The expenses incurred each year were Rs. The expenses incurred each year were Rs.4000, 6000, 7500, and 18000 respectively.4000, 6000, 7500, and 18000 respectively.

Calculate the value of life interest of A in theCalculate the value of life interest of A in the

property so settled on the valuation dateproperty so settled on the valuation dateMarch 2009, on the assumption that theMarch 2009, on the assumption that thevalue of house as per schedule III is (a) 25value of house as per schedule III is (a) 25lakhs, (b) 8 lakhslakhs, (b) 8 lakhs

The multiplier at the age of 40 is 10.093The multiplier at the age of 40 is 10.093

l i


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SolutionSolutionThe average annual income for the periodThe average annual income for the period

2006-07 to 2008-092006-07 to 2008-09

Years 2006-07 2007-08 Years 2006-07 2007-08

2008-092008-09

Income 94000 90000Income 94000 90000

9600096000

(-) Exp (5%) 4700 4500(-) Exp (5%) 4700 4500

48004800

Net Income 89300 85500Net Income 89300 855009120091200

Average annual income isAverage annual income is

89300+85500+91200 = 26600089300+85500+91200 = 266000

=


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DECISIONDECISIONPart (a)Part (a)

The value of life interest of A inThe value of life interest of A inhouse will be taken ashouse will be taken as

Rs. 894912.70 (as it is less thanRs. 894912.70 (as it is less than

16 lakh)16 lakh)Part (b)Part (b)The value of life interest is Rs.The value of life interest is Rs.

894912.70.894912.70.

However the value of the houseHowever the value of the housein respect of which A hasin respect of which A hasinterest is Rs 8 lakh.interest is Rs 8 lakh.

Therefore value of life interestTherefore value of life interest


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6. VALUATION OF JEWELLERY6. VALUATION OF JEWELLERY

The value of jewellery shall be estimatedThe value of jewellery shall be estimatedto be the price which it would fetch ito be the price which it would fetch ifsold in the open market on the valuationsold in the open market on the valuationdate. The following points should be keptdate. The following points should be kept

in view.in view.

b)b) If value of jewellery less than Rs. 5If value of jewellery less than Rs. 5lakhlakh

A statement in Form No. O-8A is requiredA statement in Form No. O-8A is required

for returnfor returnd)d) If value of jewellery more than Rs. 5If value of jewellery more than Rs. 5

lakhlakh A report of a registered valuer in FormA report of a registered valuer in Form

No.No.


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7. VALUATION OF OTHER7. VALUATION OF OTHER

ASSETSASSETS

The valuation of an asset other thanThe valuation of an asset other thancash shall be estimated either by thecash shall be estimated either by the

assessing officer himselfassessing officer himself

ororby the valuation officerby the valuation officer

In both of these cases, the valueIn both of these cases, the valueshall be estimated to be the priceshall be estimated to be the pricewhich it would fetch ifwhich it would fetch if sold in opensold in openmarketmarket, on the valuation date., on the valuation date.


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If the asset is not saleable inIf the asset is not saleable in

open marketopen market

The value shall be determined in The value shall be determined in

accordance with guidelines oraccordance with guidelines or

principles specified by the boardprinciples specified by the board

from time to time by general orfrom time to time by general orspecial orderspecial order


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Return of wealth andReturn of wealth and

assessmentassessmentEvery person is required to file withEvery person is required to file with

the wealth tax officer.the wealth tax officer.

A return of net wealth in Form BAA return of net wealth in Form BA

If his net wealth or net wealth ofIf his net wealth or net wealth of

any other person in respect ofany other person in respect ofwhich he is assessable under actwhich he is assessable under acton the valuation date is of suchon the valuation date is of suchamount as to render him liableamount as to render him liableto wealth tax.to wealth tax.


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Return in response to a noticeReturn in response to a notice

u/s-17u/s-17

If any person, in the opinion ofIf any person, in the opinion of

wealth tax officer, is assessable towealth tax officer, is assessable to

tax, the wealth tax officer may,tax, the wealth tax officer may,

before the end of the relevantbefore the end of the relevantassessment year, issue a noticeassessment year, issue a notice

requiring him to furnish, a return ofrequiring him to furnish, a return of

net wealth in prescribed form, withinnet wealth in prescribed form, within30 days from the date of service of30 days from the date of service of

such notice.such notice.


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R t ft d d tR t ft d d t


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Return after due date orReturn after due date or

amendment of return u/s-15amendment of return u/s-15

If any person has not furnished a returnIf any person has not furnished a returnwithin time allowed under section 14 (1)within time allowed under section 14 (1)or 16 (4) (i)or 16 (4) (i)

OROR

Having furnished a return discovers anyHaving furnished a return discovers anyomission or any wrong statement.omission or any wrong statement.

He may furnished a return or revisedHe may furnished a return or revised

return, as the case may-be.return, as the case may-be.Late return or revised return can beLate return or revised return can be

submitted within one year from the endsubmitted within one year from the end

of the assessment year or beforeof the assessment year or before


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REGULARREGULARASSESSMENTASSESSMENT

The Direct Tax LawsThe Direct Tax Laws

(amendment) Act, 1987 has(amendment) Act, 1987 has

amended the provisionsamended the provisionsregarding procedure forregarding procedure for

assessment. The new provisionsassessment. The new provisions

have been brought on the lineshave been brought on the lines

of the income tax act.of the income tax act.


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RECTIFICATIONRECTIFICATION

In case wealth tax authority commits anyIn case wealth tax authority commits anymistake while passing any kind of order, tomistake while passing any kind of order, to

rectify that mistake the wealth taxrectify that mistake the wealth tax

authorities have following powers:authorities have following powers:

Amendment of any order.Amendment of any order.Any order to refund.Any order to refund.

The valuation officer may amend itsThe valuation officer may amend its

orders.orders.The joint Director, Commissioner,The joint Director, Commissioner,

Commissioner (appeals), or DirectorCommissioner (appeals), or Director

may amend any of its order.may amend any of its order.

The appellate tribunal may amend anyThe appellate tribunal may amend any


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APPEALS & REVISIONSAPPEALS & REVISIONS The appeal against the order of an The appeal against the order of an

assessing officer or revision of thatassessing officer or revision of thatorder by commissioner of wealth tax isorder by commissioner of wealth tax is

possible.possible.

b)b) Filling of appeal to commissioner u/s-Filling of appeal to commissioner u/s-23A (1) / 223A (1) / 2

Within 30 days from date of receipt ofWithin 30 days from date of receipt of

notice of demand or extended date.notice of demand or extended date.

d)d) Hearing & decision of the appeal byHearing & decision of the appeal by

commissioner (appeals) u/s-23A (8A)commissioner (appeals) u/s-23A (8A)

Within a period of 1 year from the endWithin a period of 1 year from the end

of the financial year in which suchof the financial year in which such


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a)a) Passing order by commissioner onPassing order by commissioner on

application made by assessee forapplication made by assessee for

revision-u/s-25 (3A)revision-u/s-25 (3A)

Within 1 year from the end of theWithin 1 year from the end of the

financial year in which application isfinancial year in which application is

made.made.

d)d) Application to tribunal from ordersApplication to tribunal from orders

of enhancement by chieof enhancement by chief

commissioner or director general u/scommissioner or director general u/s

26 (1) 26 (1)

Within 60 days from date oWithin 60 days from date of

communication of order of Chiecommunication of order of Chief

Commissioner or Director General.Commissioner or Director General.


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a)a) Filling application to Tribunal forFilling application to Tribunal for

reference to High court u/s- 27 (1) /reference to High court u/s- 27 (1) /

(2)(2)

Within 60 days from date ofWithin 60 days from date of

service of Tribunals order orservice of Tribunals order or

within such further time nowithin such further time no

exceeding 30 days as allowedexceeding 30 days as allowedby Tribunal on sufficient causeby Tribunal on sufficient cause

c)c) Filling appeal to High court by theFilling appeal to High court by the

assessee or Chief commissioner orassessee or Chief commissioner orcommissioner u/s- 27 Acommissioner u/s- 27 A

Within 120 days of the dayWithin 120 days of the day

upon which he is served withupon which he is served with


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a)a) Filling appeal to Supreme Court u/s-Filling appeal to Supreme Court u/s-

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If the assessee is not satisfiedIf the assessee is not satisfiedwith the orders passed by Highwith the orders passed by High

Court, they may file an appealCourt, they may file an appeal

against the order of High courtagainst the order of High court

to the Supreme court, but withto the Supreme court, but with

the consent of High Court.the consent of High Court.


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Wealth Tax 1957 (in India)