THE WEALTH TAX : THE FORGOTTEN TAX

Though most of us tend to focus on income tax actually there is yet another direct tax that all us are subject to wealth tax. The basic difference between wealth tax and income tax is intuitive.
income tax is payable on income whereas wealth tax is payable on wealth and wealth is nothing but the assets that you may buy with your post tax income.
Essentially wealth tax is a tax on the benefits derived from asset ownership. The tax is to be paid on the market value of the same assets year after year, whether or not such assets yield any income.
Every individual and HUF whose net wealth as on march 31st exceeds Rs 30 lakh is required to pay wealth tax @1% of the amount that exceed Rs 30 Lakh. Wealth tax is payable on the net wealth held as on march 31st of each year.

Now good news is that wealth tax is payable only on what are termed as unproductive assets "consequently assets such as shares, securities , mutual fund, fixed deposit etc which are productive asset are exempted from wealth tax. Though there is long list of items such as yachts, boats, aircraft etc that are subject to wealth tax for our proposes we shall only consider those assets that are commonly owned such as real estate, jwellery and cars.

Wealth tax on house property: just like income tax law, one house is exempted from wealth tax. In other words ownership of more than one house will attract wealth liability on the second house onwards. There are three exceptions if the property is used for conduct of business or profession or if it forms a part of stock in trade or has been rented out for at least 300 days in the year. wealth tax is not applicable on such property.
example A friend of mine has two houses one in mumbai & the other one at his native place in chennai. His parents live in the chennai property which is valued at over Rs 50 lakh. By way of tax planning , he has asked his parents to pay him token rent of Rs 4,500 per month thereby escaping the wealth tax liability. The rental income will be taxable in his hands. offcourse the rent paid by his parents is returned back to them at the end of the year by way of a gift as gift between relatives is tax free.

Wealth tax on cars: Tax in this case would be applicable at the market price of the car. Exception are cars used in car hiring business. so if you already own car and intend to purchase another one such that the total value of your cars would go beyond 30 lacs then it would be advisable to buy it in the name of your spouse or any other family member such that wealth is spread and optimum benefit of the basic exemption of Rs 30 lakh can be claimed.


Wealth tax on Jewellery: Jewellery in this case includes ornaments made of gold, silver, platinum or any other precious metal and or precious or semi precious stones. such items even if sown into clothes or set into furniture have to be considered for wealth tax purposes. Incidently cash in hand in excess of Rs 50,000 is also subject to welath tax.

Thank you all love u .....ravikant sinha