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Wealth Tax

Applicability

Wealth Tax Act, 1957 is applicable from 1-4-1957 and applies to the whole of India .

 

Chargeability [Sec. 3]

Every individual, HUF and company is liable to pay wealth tax @ 1% of the amount by which net wealth exceeds the maximum exempt limit of Rs.30 lacs as on valuation date.

Note: There is no provision for advance payment of wealth tax.

As per Sec. 45, Wealth tax is not chargeable on the following assessee 

  • Company registered u/s 25 of the Companies Act, 1956; [i.e. Companies which are formed to promote art, science, commerce, charity, etc. and which applies its profit for promotion of its object and does not declare dividend.]

  • Co-operative Society; 

  • Social Club;

  • Political Party;

  • Mutual Fund specified u/s 10(23D) of the Income Tax Act.

  • Reserve Bank of India

Tax Point 

  • The amount of wealth-tax, interest, penalty, fine or any other sum payable, and the amount of refund due, under the provisions of this Act, shall be rounded off to the nearest rupee and, for this purpose, where such amount contains a part of a rupee consisting of paise, then, if such part is fifty paise or more, it shall be increased to one rupee, and if such part is less than fifty paise, it shall be ignored. [Sec. 44D]

  • Individual includes -  

    1. Trustees of trust who are liable u/s 21A;

    2. Association of person where share of the member are indeterminate or unknown [Sec. 21AA];

    3. Hindu Deity

    4. Heirs of an individual, who died intestate (one who has not made a will)

  • HUF includes Sikh Undivided Family. Jain Undivided Family is also treated as HUF

  • Company means company as per sec. 2(17) of the Income tax Act [Sec. 2(h)].

  • Valuation Date [Sec 2(q)]
    It means 31 st March immediately preceding the assessment year (i.e., for A.Y. 2011-12, valuation date is 31-03-2011). Wealth tax is levied on the net wealth of a person on a particular date i.e. valuation date.

  • Though wealth tax is levied on the net-wealth as on valuation date but the law in force as on the 1 st day of the Assessment year (not on the valuation date) is applicable.

  • Net Wealth [Sec. 2(m)]
    Net wealth means excess of value of assets [as defined u/s 2(ea)] belonging to the assessee (including deemed assets u/s 4) over debts relating to such assets, on the valuation date.

  • Value of asset as on last moment of valuation date is considered

  • The amount of net wealth shall be rounded off to the nearest multiple of Rs.100. [Sec. 44C]

  • 'Belong' refers to the right of ownership and not merely the right of possession

  • Debt relating to asset means any debt incurred for acquisition or construction of that asset but does not include debt secured on asset.

  • The liability under the Wealth-tax Act is not a debt owed by the assessee incurred in relation to the assets taxable under the Wealth-tax Act. The liability to wealth-tax is a personal liability of the assessee. This liability is created by the statute. Therefore, no deduction is to be allowed for the wealth-tax liability in the computation of the taxable net wealth of the assessee [Circular No. 663, dated 28-9-1993].


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