Wealth tax liability on purchase & then gifted

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CA Koustubh Vishnu Bhatye (Querist)
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02 April 2012 Respected Experts,

I need your opinion on following issue:

If a woman purchased jewellery and then gifted the said jewellery to her minor grandsons, what will be the effect of this transaction -
1. will it be included in the net wealth of the woman (i.e. grand mother) while computing the Net Wealth Tax Liability?
OR
2. Will it be included in the daughter-in-law of the woman?
3. What documents will be required to maintain?

CA Koustubh Vishnu Bhatye

CA Koustubh Vishnu Bhatye (Querist)
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10 April 2012 Very strange, No responce from any expert!

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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03 August 2025 Great question! Here's the wealth tax treatment and clarifications for the situation where a woman purchases jewellery and then gifts it to her minor grandsons:
1. Will the jewellery be included in the net wealth of the woman (grandmother) while computing wealth tax?
Yes, initially:
When the woman purchases the jewellery, it is part of her net wealth as on the valuation date (usually 31st March). So, it will be included in her net wealth for wealth tax purposes until the gift is actually transferred.
After gifting:
Once the jewellery is actually gifted and legally transferred to the minor grandsons (i.e., ownership has passed to the grandsons), the jewellery will no longer form part of the grandmother's net wealth.
Note: The date of transfer is crucial. Wealth tax is assessed on net wealth as of the valuation date, so if the gift is made before the valuation date and ownership has shifted, then it won't be counted in the grandmother’s wealth on that date.
2. Will the jewellery be included in the daughter-in-law’s net wealth?
No:
The daughter-in-law is not involved in the transaction. The gift is from the grandmother directly to her minor grandsons.
Wealth tax is charged on the individual who owns the asset as on valuation date. So, unless the jewellery belongs to the daughter-in-law on that date, it will not be included in her net wealth.
3. What documents should be maintained?
To substantiate the transaction for wealth tax purposes and avoid any dispute, the following should be maintained:
Gift deed:
A registered gift deed documenting the transfer of jewellery from the grandmother to the minor grandsons.
Proof of ownership transfer:
Evidence that ownership of the jewellery has passed, such as delivery receipts or possession proof.
Valuation report:
Valuation of jewellery as on valuation date (31st March) from a registered valuer to show the value included or excluded.
Supporting documents of purchase:
Invoice or purchase receipts of the jewellery to establish initial acquisition by the grandmother.
Summary:
Situation Wealth Tax Inclusion
Jewellery owned by woman Included in grandmother's net wealth
Jewellery gifted & transferred to grandsons before valuation date Excluded from grandmother’s net wealth; included in grandsons’ net wealth (if applicable)
Daughter-in-law’s net wealth Not affected as she neither owns nor gifted jewellery
If the jewellery remains with the grandmother as on the valuation date, it will be included in her net wealth. If it’s transferred before valuation date, it gets excluded from her net wealth and potentially counted for the recipients (minor grandsons), but minors generally don't have wealth tax liability unless represented by guardians and subject to other conditions.

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