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Summary of wealth tax act.1957

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Posted On 29 December 2013 at 10:57 Report Abuse

THE WEALTH TAX ACT, 1957

 

BASIC PROVISIONS

 

Sec

Descripttion

Provisions

3(2)

Applicability of Wealth Tax Act

Applicable to Individuals, HUF, Company, AOP.

45

Non Applicability of Wealth Tax Act

Companies registered u/s 25 of Companies Act, 1956, Co-operative Societies, Social Club, Political Party and Mutual Funds, RBI.

3(1)

Chargeability of Wealth Tax

Tax payable at 1% on the Taxable Net Wealth in excess of Rs.30 Lakhs, determined on the basis of Nationality, Residential Status, Location of Assets as on the Valuation Date.

2(ea)

Assets covered

Buildings or Lands appurtenant thereto, Motor Cars, Jewellery/Bullions/Furniture, Yachts/Boats/Aircrafts, Urban Land, Cash in hand( Individuals & HUF – in excess of Rs.50,000 / Others-Amounts not recorded in the Books).

2(ea)

Assets Excluded – Buildings

Residential House of Company allotted to Officer with Gross Salary less than Rs.10 Lakhs p.a. / Held as Stock in Trade / Used for Business or Profession / Residential House let out for 300 days during PY / Commercial Establishment or Complex

2(ea)

Assets Excluded – Motor Cars

Used for Business of Hire / Held as Stock in Trade

2(ea)

Assets Excluded – Jewellery

Stock in Trade / Gold Deposit Bonds under Gold Deposit Scheme, 1999.

2(ea)

Assets Excluded – Yachts, Boats / Aircrafts

Used for Commercial Purposes / Ship.

2(ea)

Assets Excluded – Urban Land

Land on which construction is prohibited / requires approval from Authorities under any law / Industrial purposes for 2 years from acquisition / Stock in Trade for 10 years

2(ea)

Assets Excluded – Cash in Hand

For Individual / HUF – upto Rs.50,000,

For Others – amount recorded in Books

4

Deemed Assets

  1. Transfer to Spouse directly/indirectly for inadequate consideration,
  2. Assets held by the Minor,
  3. Transfer to any AOP/any person for the benefit of Spouse,
  4. Revocable transfer to Son’s Wife for inadequate consideration
  5. Conversion of Individual Property into HUF Property,
  6. Transfer to any person by Book Entries or as Gift,
  7. Transfer u/s 53A of Transfer of Property Act, 1872.

5

Exemptions – Wealth Tax Liability

  1. Charitable Trusts / Funds / Institutions: All Assets held under Trust for Charitable or Public Purpose.
  2. Members of HUF: Interest in HUF Property as Co-Parcener.
  3. Ex-Ruler: Heirloom Jewellery and any one building in his occupation declared as his Official Residence / Palace.
  4. NRIs returning for Permanent Residence: Assets acquired out of monies brought in and proceeds of assets brought in for 7 successive AYs.
  5. Individual / HUF: Any one house or part of house or one plot of land not exceeding 500 Sq.Mtr.

 

VALUATION OF ASSETS

 

Asset

Valuation Principle

Buildings

Gross Maintainable Rent (GMR)

[Rule 5]

Property let out: GMR = Annual Rent Received / Receivable*, or Value assessed by Local Authority whichever is higher.

Property not let out: If Municipal Rent is available, GMR = Municipal Rent, otherwise Fair Rent.

Net Maintainable Rent (NMR)

[Rule 4]

GMR Less Municipal Taxes levied by Local Authority Less 15% of GMR.

Capitalisation of NMR (CNMR)

[Rule 3]

If property is constructed on

Computation

Freehold Land:                      

NMR x 12.5

Leasehold Land:

Unexpired Lease Period

  1. 50 years or more
  2. Less than 50 years

 

 

NMR x 10

NMR x 8

 

Asset

Valuation Principle

 

Substituted NMR (SNMR)

[Rule 3]

Computation = Higher of CNMR and Cost of Acquisition / Construction plus Cost of any Improvement.  

Acquisition or Construction is completed after 31.03.1974,

 

Exceptions to Rule of SNMR for one Building

  1. Such Building is used for own residential purposes throughout the relevant PY
  2. The Actual Cost of Acquisition or Construction does not exceed:

If Building situated at

Cost

  • Mumbai / Delhi / Kolkata / Chennai
  • Any other place

Rs. 50 Lakhs

Rs. 25 Lakhs

Determination of Adjusted Net Maintainable Rent

[Rule 6]

Unbuilt Area (UA): The part of Aggregate Area in which no building has been erected.

Aggregate Area (A): Area in which property is built + Unbuilt Area(UA0

Specified Area (SA) :

Property Situated at

SA in terms of % of A

  1. Mumbai, Delhi, Kolkata & Chennai
  2. Agra, Ahmadabad, Allahabad, Amritsar, Bangalore, Bhopal, Cochin, Hyderabad, Indore, Jabalpur, Jamshedpur, Kanpur, Lucknow, Ludhiana, Madurai, Nagpur Patna, Pune, Salem, Sholapur, Srinagar Surat, Tiruchirapalli, Trivandrum, Vadodara (Baroda) or Varanasi (Benaras),
  3. Any other place

60%

65%

 

 

 

 

 

 

70%

Excess of UA over SA

Upward Adjustment in Rule 3

 5%

Exceeds 5%   10%

Exceeds 10%   15%

Exceeds 15%   20%

No Adjustment

20%

30%

40%

Deduction for Unearned Increase [Rule 7]

Least of amount recovered as Unearned Increase and 50% of SNMR

Determination of Annual Rent

 

 

       Annual Rent Received / Receivable

  • Municipal taxes borne by tenant
  • 1/9 of actual rent if tenant bear the repair expenses
  • Interest @ 15% p.a. on the amount of deposit (calculate outstanding amount on monthly basis) made by tenant provided deposit in not in nature of advance rent for 3 months or less
  • Amount received as premium or otherwise for leasing the property as divided by the period of lease
  • Any other payment for the use of the property by whatever name called the value of benefits or perquisites, whether convertible to money or not, obtained from tenant in respect of any obligation of owner.

Assets of Business [Rule 14]

Value of Taxable Assets is aggregate of – (a) Depreciable Assets at their WDV, (b) Non-Depreciable Assets at Book Value, (c) Closing Stock at value adopted for Income tax purposes, and (d) Other Assets not disclosed in B/S, in accordance with Schedule III

Interest of Partners / Members in a Firm / AOP

[Rule 16]

Net Wealth is allocated as under –

  1. To the extent of Capital Contribution – In the Capital Contribution Ratio.
  2. Excess in Exempted Asset included in Net Wealth of the Firm / AOP =

Life Interest

[Rule 17]

Value of Life Assets = Average Annual Income (after exps) based on past 3 years x Multiple Factor (Schedule III)

Jewellery

[Rule 18 & 19]

Estimated as per Realizable Value, if sold in the Open Market, i.e. at Fair Market Value

Report of a Registered Valuer required if FMV of Jewellery exceeds Rs. 5 Lakhs.

Other Assets

[Rule 20]

In case of Saleable Asset: Price at which it can be sold in the Open Market,

In case of Others: As per CBDT Guidelines

 

OTHER PROVISIONS

 

Sec

Descripttion

Provisions

14(1)

Return of Wealth

  1. Company
  2. Person other than Company
  • Subject to audit under Income Tax / Any other law
  • Not subject to Audit
  • Company required to furnish a Report u/s 92E

 

30th September of Relevant Assessment Year(RAY)

 

 

30th September of RAY

31st July of RAY

 

30th November of RAY

15

Belated Return / Revised

One year before end of AY or completion of Assessment, whichever is earlier

16A

Reference to Valuation Officer

  1. If valued by Registered Valuer: Value of Asset declared < FMV
  2. Other Cases: FMV exceeds Value of Asset as returned, by more than 33 1/3% or Rs.50,000

Notfn

Jurisdiction of Valuation Officer

Valuation Officer

Net Wealth

Assistant Valuation Officer

Valuation Officer

District Valuation Officer

Upto Rs. 40 Lakhs

Upto Rs. 300 Lakhs

Above Rs 300 Lakhs

18

Concealment of Net Wealth

Deemed to have Net Wealth if –

  1. Fails to offer satisfactory explanation,
  2. Fails to substantiate explanation,
  3. Fails to file return of wealth without reasonable cause,
  4. Undisclosed Assets found during search,
  5. Value returned is less than 70% of the value of such asset determined in assessment
  6. Offers a false explanation

19

Legal Representative

Liable to file return and pay tax, if the deceased has not executed any will. Residential Status and Tax Status will be same as the deceased.

19A

Executors

Liable to file return and pay tax, if the deceased has executed a will. Residential Status and Tax Status will be same as the deceased.

 

 


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