Twelve smart things to know about wealth tax

Twelve smart things to know about wealth tax

 

1) Wealth tax is an annual direct tax imposed on the net wealth of individuals and HUFs with reference to the preceding financial year or the current assessment year.

 

2) Net wealth is calculated as the aggregate value of all chargeable assets on the valuation date, minus the outstanding debt on these assets.

 

3) Financial assets, one residential property, as well as cars, property and other assets used for commercial or business purposes are exempt from wealth tax. Any property rented for at least 300 days in a year also doesn't attract wealth tax.  In case you are owning more than one residential property,  renting out the second property, if necessary, for a small rental to avoid tax.

 

4) The taxable assets for wealth tax include real estate and land other than a house, precious metals, including jewellery and bullion, motor cars, urban land and cash more than Rs 50,000. If there are two cars, buy the second one in wife’s name to avoid tax

 

5) Wealth tax is charged at 1% on the amount that exceeds Rs 30 lakh of the net wealth of the assessee on valuation date, which is 31 March of a financial year.

 

6) For resident Indians, wealth tax is payable on all taxable assets in India or abroad. For NRIs, wealth tax is applicable only on the assets that are in India.

 

7) Wealth tax return has to be filed by 31 July. You have to use the four-page Form BA for filing the return.

 

8) 1% interest for every month of delay. Penalty for evasion is 100-500 % of the evaded amount. In extreme cases, even jail.

 

9) If you sell a property before the 31st of March of a financial year, you would not have to include that asset while calculating wealth tax. But the gains from the sale would be included in income tax

 

10) If you find yourself liable for wealth tax, merely transferring the asset to your spouse will not help. Clubbing provisions similar to those applicable in income tax law are also applicable in the case of wealth tax. Therefore, any assets gifted to spouse, minor child or son's wife will be, notwithstanding the gift, deemed to belong to the taxpayer. 

 

11) Gold ETF (Equity Traded Fund) are out of the purview of wealth tax i.e. gold traded funds are the funds and not the gold, people are holding the fund certificate and not gold as defined in the act even though the underlying asset in the certificate is gold.  To avoid tax buy gold in electronic form instead of physical form  

 

12) A plot of land comprising of an area of 500sq.mtrs or less is out of the purview of taxable assets.