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Wealth tax

avinash annam (C.A-IPCC article student) (79 Points)

13 August 2011

can some one help me regarding wealth tax!

is wealth tax applicable to a ltd company?what r the rates of wealth tax of a ltd co?

wealth tax is a allowable expenditure?

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18 Replies

Kunal (Risk Analyst) (299 Points)
Replied 13 August 2011

Wealth tax is applicable to all Co.'s. However as per sec 45 wealth tax is not applicable on co's registered u/s 25 of co's act 1956. As per sec 3 of WTA wealth tax is charged @ of 1% of the amount by which wealth exceeds Rs. 30 lacs. And wealth tax is not an allowable expenditure.

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Sandeep Arora (Learner) (139 Points)
Replied 13 August 2011

1. Wealth tax is applicable to Individual, HUF and companies in accordance with the section 3 of the wealth tax act, 1957.

companies i.e. public and private. i.e. applicable to ltd,co. also.

2. Rate of wealth tax is 1% of net wealth. wealth tax shall be charged if net wealth exceeds rs.30 lacs.

3. As per Income tax act, 1961 wealth tax is not allowable as deductions. therfore it will be added back if such tax has been debited to profit&loss account.

SUBHASH JAIN (ACCOUNTANT) (401 Points)
Replied 13 August 2011

IN THE INDIVIDUAL HOUSE PROPERTY IS EXEMPTED FROM WEALTH TAX. AND IS IT PAYABLE EVERY YEAR OR IT IS ONE TIME TAX

Kunal (Risk Analyst) (299 Points)
Replied 13 August 2011

In case of individual as well as HUF one house or a plot of land measuring less than 500sq mt is exempt u/s 5(vi). N yes it is paid every year. Dates are same as under 139(1).

Kunal (Risk Analyst) (299 Points)
Replied 13 August 2011

Correction *plot of land measuring 500 or less than 500 sqmt.

SUBHASH JAIN (ACCOUNTANT) (401 Points)
Replied 14 August 2011

Rs. 3000000 wealth is exempt from wealth tax , what type of wealth is exempted

Raju (none) (45 Points)
Replied 14 August 2011

There were some websites mentioning that some type of assets are exempted from wealth tax and some types are taxed. I am sure there are experts in this forum who has a comprehencive list of assets which are exempted from wealth tax. Can some expert give us the detailed info?

SUBHASH JAIN (ACCOUNTANT) (401 Points)
Replied 14 August 2011

PLEASE TELL US THAT WHAT IS THE MATHOD OF VALUATION FOR WEALTH TAX .

SUBHASH JAIN (ACCOUNTANT) (401 Points)
Replied 15 August 2011

Please provide us wealth tax detail

CA PARAS BAFNA (Practising CA ) (33423 Points)
Replied 15 August 2011

1. Wealth tax is levied @ 1% on the net wealth as on valuation date i.e. 31.03.xx exceeding Rs. 30.00 lacs. If Net Welath is 4000000/- Wealth Tax payable =40-30=10lacs *1% = 10000

2. Netwealth = Asssets +Deemed Assets -Exempted Assets- Debt Owed

3. Assets: (Sec. 2(ea) )

(i) Guest House, Residential house or commercial building, Farm House (Within 25 kms from local limits of municipality

Exceptions : 1. In case of company, residential houses allotted to an employee or a ...............................................................whole time director whose salary is below 5lacs (excluding perks) is not an asset.

2. Stock in Trade , premises used for own business or profession, let out property .................................................................for 300 or more days and commercial complex is also not an asset.

(ii) Motor Cars (Except Stock in Trade)

(iii) Jewellery Bullion, Utensils of precious metals (Except stock in trade)

(iv) Yachts boats and aircrafts other than used for commercialpurpose

(v) Urban Land

4. Deemed Assets :

Like clubbing provisions in IT in wealth tax also such provisions are there involving minor's wealth and transferred wealth.

5. Exempted Assets:

5.1 Property held under a trust

5.2 Co-Parcenary Intereest in HUF Property

5.3 One palace of ex-ruler

5.4 Heirlooms of former rulers.

5.5 Assets of Returning NRIs

5.6 One House or part of house or Plot.

6. Cash : is an asset

For Individuals : Cash Exceeding Rs 50000/-

For Companies: Cash not accounted for in the Books of the Co.

7. Debts Owed :

Debts taken against "Assets" and "Deemed Assets" .

Raju (none) (45 Points)
Replied 16 August 2011

Thank you Paras for the details. Can you also please answer a couple of questions below.

1. You mentioned about "let out property .................................................................for 300 or more days and commercial complex is also not an asset". So, if I give my house or commertial property for rent for more than 300 days in an year, there is no wealth tax on that house or commertial property?

2. How to calculate the value of a Urban Land? Also How to value a house / shop?

Thank you in advance.

avinash annam (C.A-IPCC article student) (79 Points)
Replied 16 August 2011

if company is not paying wealth tax then whatare the actions taken by the department?

CA PARAS BAFNA (Practising CA ) (33423 Points)
Replied 16 August 2011

Q- if company is not paying wealth tax then whatare the actions taken by the department?

Reply- The department can issue notice to the Company for filing its WT Return within 30 days during the Assessment Year. Penalty Provisions for concealment of Net Wealth as well as for non-compliance of notices are also there in the WT Act.

On the basis of IT return the department gathers information about the possible items of wealth. Suppose the Company Items show Gold or Jewellery as an Investment - its an asset under Wealth Tax Act , Motor Cars are also asset. Checking the assets, they may form an opinion that what constitute Assets for the company.

CA PARAS BAFNA (Practising CA ) (33423 Points)
Replied 16 August 2011

Q- 1. You mentioned about "let out property .................................................................for 300 or more days and commercial complex is also not an asset". So, if I give my house or commertial property for rent for more than 300 days in an year, there is no wealth tax on that house or commertial property?

Reply- Due to preciseness and certain limitations , every thing could not be written in the earlier reply.

Moreever, the information given above or general in nature.

Let Out of property for 300 or more days is required in case of Residential Property only.

For Commercial Complex , there is no such condition. So eeven if it is used for own business purpose or let out (even for less than 300 days) it is covered under the exception and will not be, thus, treated as an Asset.