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Assets belonging to others but includible in the net wealth of the individual :-

Sometimes people transfer their wealth to the relatives for escaping from wealth tax. Gift made by book entries are also taxable as wealth until the wealth tax officer is convinced that money is actually delivered.

1. The individual must be the owner of those assets.

2. Those assets must be transferred without consideration

3. Those assets must be held by the transferor on valuation date unless they are destroyed or lost.

Example :

Mr. A transfers  A cow to Mr. B  without any consideration . Mr. B sells the cow and then earn money. Can such money be added to the wealth of Mr. A ?

Answer is NO. As animal is not an asset as according to the Wealth tax act 1957.

Section 4 describes that following transfer shall be included in the wealth of an assesee.

 Asset Transferred to



4(1)(a) (i)

Minor child

4(1)(a) (ii)

A person/ AOP

4(1)(a) (iii)

Under revocable transfers

4(1)(a) (iv)

Son’s wife/ minor child

4(1)(a) (v)

Son’s wife

4(1)(a) (vi)

Interest in the assets of the firm

4(1)(a) (b)

Converted property


By means of entries in books


Impartible assets


House from a co- operative society


Above ruling are same as in the clubbing of Income. But some are different or new  from the clubbing chapter. These are:

Under revocable transfers: - Revocable assets are transferred to the individual’s assets if following conditions get satisfied.

1. If such transfer revocable within a period of 6 years or during the lifetime of the transferee’s .

2. Transferor derives any benefit , directly or indirectly from the assets transferred.

3. Transferor has a right to re transfer , directly or indirectly , whole or any part of assets.

4. Right to re-assume powers.

Assets transferred by an individual to son’s wife Section 4(1)(a) (vi)

Directly or indirectly , assets transferred on or after 1june1973  without adequate consideration , to a person or an AOP for the immediate or deferred benefits of son’s wife are deemed to be the assets of the asssessee.

Interest in the assets of the firm :-

1. Minor’s interest will be  clubbed as according to the clubbing rules.

2. And in the case of partners , first the net wealth will be distributed to partner according to the share of their capitals

3. And in excess of the capital will be distributed in profit sharing ratio or otherwise shared  equally.

4. Where firm’s assets  located outside India , its value will be determined as if it were situated in India reduced by the debts.

Transfer by means of entries in the books Section 4 (5A)

Where a gift of money from one person to another is made by means of  entries in the books of  account maintained by any one or more of the following persons :-

a. The donor

b. An individual with whom the donor has business or other relationship

c. An HUF / Firm / AOP/BOI with which donor has business connections.

The amount so gifted will be included in the net wealth of the donor unless the donor proves.



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