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Income tax vs wealth tax

Vishwas (Student) (31 Points)

05 May 2012

What's the difference between Wealth Tax and Income Tax ? Why their is such a tax called "Wealth" tax, when already a tax is appliced while incoming of wealth ( ie. income tax ) ?

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2 Replies

Giridhar S Karandikar (Team Lead) (7553 Points)
Replied 06 May 2012

Income-tax is a tax on the income earned by the assessee. this may be business income, salary etc..

On the other hand wealth-tax is levied on the wealth possessed by the assessee which is teh value of the assets possessed by the assesse during th financial year. It means for the puspose of levying wealth tax there should be asset. whihc satisfies the conditin as mentieond u/s 2(ea) of the WT Act. If a particular asset fulfills the condition to be regarded as an asset under the WT act, then it is considered as an wealth of the asseess & he is required to pay wealth tax on it. There are various assets whihc are considered to be assets under the WT act. These are gold, property, land etc.. If the total value of these assets minus the laibilities incurred in relation to such assets exceeds Rs. 30lacs, then wealth tax on the net wealth is levied @ 1% of the net wealth.

So teh underlying measure for tax under the income-tax act is income & in case of wealth tax is assets possessed.