Charging Section 3: Subject to the other provisions contained in this Act, there shall be charged for every assessment year commencing on and from the 1st day of April, 1993, wealth-tax in respect of the net wealth on the corresponding valuation date of every individual, Hindu undivided family and company, at the rate of one per cent of the amount by which the net wealth exceeds fifteen lakh rupees.
No surcharge and/or Education Cess: There will not be any surcharge and/or education cess on wealth tax.
Section 45No tax shall be levied under this Act in respect of the net wealth ofl Any company registered under section 25 of the Companies Act, 1956 (1 of 1956); Any co-operative society; Any social clubl Any political party. Mutual Fund specified under clause (23D) of section 10 of the Income-tax Act.
Judicial Rulings: Trusts are not liable to wealth tax. Artificial Juridical Persons are not liable to wealth tax. Partnership Firms and Association of Persons (AOP) are not liable to wealth tax, but partners of the firm or the members of AOP are liable to wealth tax for their respective share in Firm or AOP.
Valuation Date – Section 2(q): “Valuation Date”, in relation to any year for which an assessment is to be made under this Act, means the last day of the previous year as defined in [section 3] of the Income-tax Act, if an assessment were to be made under that Act for that year.
Computation of Net Wealth Net Wealth is computed in the following manner.
Particulars Amount (Rs.)
Assets (a) XXXXX
Add: Deemed Assets (b) XXXXX
Less: Exempted Assets (c) XXXXX
Sub Total (a)+(b)-(c) (d) XXXXX
Less Debt Owed (e) XXXXX
Net Wealth (d)-(e) (f) XXXXX
Section 2 (ea) “Assets”, in relation to the assessment year commencing on the 1st day of April, 1993, or any subsequent assessment year, means—
1) Any building or land appurtenant thereto (hereinafter referred to as “house”), whether used for residential or commercial purposes or for the purpose of maintaining a guest house or otherwise including a farm house situated within twenty-five kilometres from local limits of any municipality (whether known as Municipality, Municipal Corporation or by any other name) or a Cantonment Board, but does not include— A house meant exclusively for residential purposes and which is allotted by a company to an employee or an officer or a director who is in whole- time employment, having a gross annual salary of less than five lakh rupees; Any house for residential or commercial purposes which forms part of stock-in-trade; Any house which the assessee may occupy for the purposes of any business or profession carried on by him; Any residential property that has been let-out for a minimum period of three hundred days in the previous year; Any property in the nature of commercial establishments or complexes;]
Section 2 (ea)2) Motor cars (other than those used by the assessee in the business of running them on hire or as stock-in-trade)3) Jewellery, bullion, furniture, utensils or any other article made wholly or partly of gold, silver, platinum or any other precious metal or any alloy containing one or more of such precious metals (not being stock-in-trade of the assessee.) “Jewellery” includes—
(i) Ornaments made of gold, silver, platinum or any other precious metal or any alloy containing one or more of such precious metals, whether or not containing any precious or semi-precious stones, and whether or not worked or sewn into any wearing apparel ;
(ii) Precious or semi-precious stones, whether or not set in any furniture, utensils or other article or worked or sewn into any wearing apparel ; However, it does not include the Gold Deposit Bonds issued under the Gold Deposit Scheme, 1999 notified by the Central Government.
Section 2 (ea)4) Yachts, boats and aircrafts (other than those used by the assessee for commercial purposes)5) Urban land “Urban land” means land situated—
(i) In any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population of not less than ten thousand according to the last preceding census of which the relevant figures have been published before the valuation date ; or
(ii) In any area within such distance, not being more than eight kilometres from the local limits of any municipality or cantonment board may, having regard to the extent of, and scope for, urbanisation of that area and other relevant considerations, specify in this behalf by notification in the Official Gazette, But does not include land on which construction of a building is not permissible under any law for the time being in force in the area in which such land is situated or the land occupied by any building which has been constructed with the approval of the appropriate authority or any unused land held by the assessee for industrial purposes for a period of two years from the date of its acquisition by him [or any land held by the assessee as stock-in-trade for a period of [ten] years from the date of its acquisition by him.]6) Cash in hand, in excess of fifty thousand rupees, of individuals and Hindu undivided families and in the case of other persons any amount not recorded in the books of account.
Section 41) It includes, in relation of an individual the value of assets which on the valuation date are held l By the spouse of such individual to whom such assets have been transferred by the individual, directly or indirectly, otherwise than for adequate consideration or in connection with an agreement to live apart, or l By a minor child, not being [a minor child suffering from any disability of the nature specified in section 80U of the Income- tax Act or] a married daughter, of such individual, or Provided that nothing contained in this point shall apply in respect of such assets as have been acquired by the minor child out of his income referred to in the proviso to sub-section (1A) of section 64 of the Income-tax Act and which are held by him on the valuation date.
Section 4) By a person or association of persons to whom such assets have been transferred by the individual [directly or indirectly] otherwise than for adequate consideration for the immediate or deferred benefit of the individual, his or her spouse, or by a person or association of persons to whom such assets have been transferred by the individual otherwise than under an irrevocable transfer, or By the son’s wife, of such individual, to whom such assets have been transferred by the individual, directly or indirectly, on or after the 1st day of June, 1973, otherwise than for adequate consideration by a person or association of persons to whom such assets have been transferred by the individual, directly or indirectly, on or after the 1st day of June, 1973, otherwise than for adequate consideration for the immediate or deferred benefit of the son’s wife Whether the assets referred to in any of the points aforesaid are held in the form in which they were transferred or otherwise.
Section 42) In relation to an assessee who is a partner in a firm or a member of an association of persons (not being a co-operative housing society), there shall be included, as belonging to that assessee, the value of his [interest in the assets of the firm] or association determined in the manner laid down in Schedule III [Provided that where a minor is admitted to the benefits of partnership in a firm, the value of the interest of such minor in the firm, determined in the manner specified above, shall be included in the net wealth of the parent of the minor, so far as may be.
Section 43) Where, in the case of an individual being a member of a Hindu undivided family, any property having been the separate property of the individual has, at any time after the 31st day of December, 1969, been converted by the individual into property belonging to the family through the act of impressing such separate property with the character of property belonging to the family or throwing it [into the common stock of the family or been transferred by the individual, directly or indirectly, to the family otherwise than for adequate consideration (the property so converted or transferred being hereinafter referred to as the converted property)], then, notwithstanding anything contained in any other provision of this Act or in any other law for the time being in force, for the purpose of computing the net wealth of the individual under this Act for any assessment year commencing on or after the 1st day of April, 1972,—
(a) the individual shall be deemed to have transferred the converted property, through the family, to the members of the family for being held by them jointly ;
(b) the converted property or any part thereof shall be deemed to be assets belonging to the individual and not to the family ; where the converted property has been the subject-matter of a partition (whether partial or total) amongst the members of the family, the converted property or any part thereof which is received by the spouse of the individual on such partition shall be deemed to be assets transferred indirectly by the individual to the spouse and the provisions of sub-section (1) shall, so far as may be, apply accordingly :] Provided that the property referred to in clause (b) or clause (c) shall, on being included in the net wealth of the individual, be excluded from the net wealth of the family or, as the case may be, the spouse of the individual.]4) For the purposes of this Act, the holder of an impartible estate shall be deemed to be the individual owner of all the properties comprised in the estate.
Section 5 Following assets shall not be included in the net wealth of the assessee.
1) Any property held by him under trust or other legal obligation for any public purpose of a charitable or religious nature in India. (Some Exceptions)
2) The interest of the assessee in the coparcenary property of any Hindu undivided family of which he is a member.
Section 54) Jewellery (Being Heirloom and not personal property) in possession of ex-ruler.5) In the case of an assessee, being a person of Indian origin [or a citizen of India (hereafter in this clause referred to as such person)] who was ordinarily residing in a foreign country and who, on leaving such country, has returned to India with the intention of permanently residing therein, moneys and the value of assets brought by him into India and the value of the assets acquired by him out of such moneys [within one year immediately preceding the date of his return and at any time thereafter]:
Provided that this exemption shall apply only for a period of seven successive assessment years commencing with the assessment year next following the date on which such person returned to India. A person shall be deemed to be of Indian origin if he, or either of his parents or any of his grand-parents, was born in undivided India.] For the removal of doubts, it is hereby declared that moneys standing to the credit of such person in a Non-resident (External) Account in any bank in India in accordance with the Foreign Exchange Regulation Act, 1973 (46 of 1973), and any rules made thereunder, on the date of his return to India, shall be deemed to be moneys brought by him into India on that date;]6) One house or part of a house or a plot of land belonging to an individual or a Hindu undivided family.
Debt owed means debt owed by the assessee on the valuation date and which have been incurred in relation to the assets which are included in the net wealth.
FROM: CA. TEJAS ANDHARIA
B. Com., FCA, D.I.S.A.(ICAI), D.I.R.M.(ICAI)