Wealth Tax www.cshindinotes.

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Wealth Tax

Wealth tax:l l| ini i Net Wealth 30 lakh Rs. li ri ni r excess
amount 1% Wealth Tax ini| Wealth Tax Act, 1 April 1957 in ri|


Sec. 2 (ea):- Assets:-
[1.] Building: ini | i| nr | Building-commercial, Farm House, Guest
House, Residential house il Assets - iil- | in| r| n l- i iil- r| li
ini r|
1. l Residential Building Stock in Trade - ri|
2. l l| Residential Building i 300 l i li Rent li i|
3. l building assessee business ( godown, office) - use i ni Assets -
iil- r| | in||
4. l i; farm House ,urban area zr k.m. ri ni Assets - r| ini|
5. Commercial complex Assets - iil- r| li ini r|
6. l -| | Building full time employee or directors i r l
(l| Gross Salary 5,00,000 . - ri) ni building Assets - iil- r|
rin||

Note:- god own i factory building li | in| ni Assets - iil- rin|| n
office building Assets - iil- r| n|
School i club | Building rent | i ni Assets -i| in||


[2.] Car:- l Car stock-in-trade - r ni Assets - iil- r| rin| ii taxi i -
in i r| r ni Assets - iil- r| rin|| personal use | car Assets -i| in| r|

Note: - Bus, Truck or Tractor Assets r| -i in r| n J eep Assets -i| in||


[3.] Jewellary:- l J ewellary stock-in-trade - r ni Assets r| -i| in|| personal
use | ri ni Assets - iil- rin||

Note:- i, i|, r|, --i il Assets - iil- rin


[4.] Ship, Boat, Aircraft:- Ship, Boat, Aircraft l personal use l in ni
Assets - iil- rin| n Business - use l in ni Assets - iil- r| rin|


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[5.] Urban land (ir| il- ) a,aaa i ii | ii| i i - s l-|a |
li| - i ii land ,urban land rini| nii 8 km. l-in land Assets - iil-
r| rini|

i
1. l land stock-in-trade - r ni 10 ii n Assets - iil- r| rini|
2. Industrial Land 2 ii n Assets - iil- r| rini|
3. l l| Land Government Authority construction | i n| r| ri ni
Assets - iil- r| rini|
4. l l| Land Government Authority | -ln construction i li
i ni r Assets - iil- r| rini|


[6.] Cash in hand:- Individual & HUF l ra,aaa . li | ili Assets -
iil- | in|| n company or firm l i cash books - Record r| li ni r,
r Assets - iil- li ini|

Valuation date ( -~i lnli) :- - financial year | Last date (31.03.2012)
valuation date rin| r| ; l i -ln ini i rin| r | Assets - iil-
rin||


Net Wealth:- Gross Value - Assets Related Loans i Liability Less
i ii ili Net Wealth -i| in| |
Note:- Net Wealth Negative ri n| r|

CHARGE AND SCOPE OF WEALTH TAX

[1.] li -ii iii ini i n| lii - i-i ni r

1. Ordinary Resident
2. Not Ordinary Resident
3. Non Resident
[2.] inlni iii ini i i rin r

1. Indian citizen
2. Foreign citizen

[1.] Assessee is citizen of India and resident in India ( iin| inl nii iiii
li| ) iin - ii iin ir l-in i| -lni Wealth - iil- | in|| nii
-lni -lin Loan Or Liability Less l in|

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[2.] Non resident, Not Ordinary Resident, Foreign Citizen:-
iin - l-in -lni Wealth - iil- | in|| iin ir l-in i| -lni
wealth tax l Add r| | in||

DEEMED ASSETS

[1.] Sec.4(1)(a)(i) -ln i |ii| i r-nini l i; -ln li iin ln
|ii| i Transfer | i ni r -ln r-nini ni add | in||
(a) Assets Transfer n - i Valuation Date ii - ln-| i
-i ln-i rii ilr|
(b) l Asset Assessment Year 1964-65 1971-72 | Transfer | i
ni r r-nini ni Add r| | in||

[2.] Minor child {- | -ln} Minor Child | Asset Mother,
Father l| Wealth ii ri - add | in||
(a) l Minor Child Handicapped r ni | Assets Mother, Father | Wealth -
add r| | in||
(b) l Minor Married Daughter r ni | -lni Mother, Father | Wealth
- add r| | in||
(c) Minor Child | Ability Or Physical Work i; Assets in ni r
Mother, Father | Wealth - add r| | in||

[3.] l i; -ln - i Spouse Benefit l lni i Transfer | i
ni i| r Assessee | wealth - add | in||

[4.] Revocable Transfer (i| r-nini) l Assets i Revocable Transfer
li i ni r Assets r-nini ni add | in||
i
(a) l -ln inni |i l transfer | i ni r
r-nini ni | wealth - add r| | in||
(b) l Revocable Transfer ni 6 i li - l li ni ri
ni i| -ln r-nini add r| | in||

[5.] Assets transfer to sons wife:- l i; -ln s.ar.s/s i i i transfer
| i ni r r-ninini add | in||

[6.] l s.ar./s i i benefit l l| ln i -ln i r-nini
li i ni i| r transferor add | in||

[7.] Firm Wealth Tax i Payment r| n| r n - | Wealth Member or
Partner - i- deemed wealth - taxable | in| r|

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[8.] HUF i transfer:- l HUF i member 31.12.69 i | Assets i Transfer
ni Assets Transferor wealth - add | in||

[9] Book entry ,ii Transfer:- l i; Assets Books - Entry transfer |
i | actual i Physical Transfer r| | i ni transferor | wealth - add | in||

[10] HUF | liiln -ln i member maintain ni i ini r assets | |
deemed wealth -i| in||

[11] Housing co-operative society - Assets l Member i allot | in| r
member i deemed owner -ii ini|

[12] l i; Assets Sale | i n | l--| i; i ni i| purchaser
i deemed owner -ii ini| nii assets purchaser | deemed wealth -i
taxable | in||

Exempted Assets

[1.] Sec. 5(i):- l l| Charitable Trust i i; -ln r ni r -ln wealth tax
free rn||

[2.] HUF - share i lr-i| [Sec. 5(ii)] :- HUF - Wealth Tax i inni n| r
;l members l r -ln -n rn||

[3.] Sec. 5(iii):- in ii-riii l -r ( official residence ) -n rni|
l l ; li li i ni Sec. 5(iii) - exempt r| rini|

[4.] Sec. 5(iv):- in ii-riii n| | -n rn||

[5.] Sec. 5(v):- l i; iin| inl ii iin| - i ln i li - r ri r
-ii| i r l iin i ini r, ni li i; n; -lni iin i | Date
7 ii n -n rn||
(a) iin i i n i|| n| i| -lni iin i 7 ii n -n rn||
(b) Non Resident external A/c - -i ili ii -lni 7 ii n -n rn||
(c) Out of India i; n| -lni i sale l ri ; -ln i|| in| ni r
-ln i | in||

[6.] Sec. 5 (vi):- Individual nii HUF l -i ii 500 Square Meter n i
i- -n rni|
l -ln | Net Wealth ii ri Sec. 5(vi) - exempt li ini|
-i - r - Use i ri , Let out ri ii deemed wealth - add ri
ri ri ni ini | s- ni r|


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Valuation of Assets

[I] Valuation of self occupied House:-

(a) l i; House property April 1971 r purchase ii construction i; i
ni s.as./ | value ini | wealth - add | in|| Market Price i consider r|
n|

(b) l House property April 1971 -i 74 | purchase ii construction i;
i ni 1
st
valuation date | value wealth -i| in|| Market Price i consider r|
n|

(c) l -i s/ i ni i i 1
st
valuation date, 31 March in| r|
value wealth -i| in|| Market price i consider r| n|
EXCEPTIONS:-

[1.] l -i | inn zr,aa,aaa ii li r ni Actual Cost And 1
st
Valuation
Date | value ii - i ii ri wealth -in| Market price i consider r|
n|

[z.] l House property metro city - r nii cost 50 ii li r ni cost and 1
st

valuation date | value i ii ri wealth -in|

[II] Valuation of Let-out House:-

Step- I :- Calculation of Gross Maintainable Rent:-
(A) Annual rent received or receivable
Add- (i) Local taxes borne by the tenant. xx
(ii) If the expenses of repairing are borne by the tenant,
then 1/9
th
of actual rent. xx
(iii) 15% interest on the amount of deposit (if interest is payable, the
actual amount of interest paid should be deducted). xx
(iv) Amount received as premium ( Total Amount /no. of years) xx
(v) Other Benefits or perquisites derived by the owner of the house whether
convertible into money or not. xx


(B) Annual value as determined by the local authority i.e., municipal valuation
Gross Maintainable Rent [which ever is more(A & B)]

Step II.) Calculation of Net Maintainable Rent:-

Deduct- (i) Local taxes levied by local authority ( owner +tenant ) xx

XX







XX
XX

XX
XX




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(ii) 15% of gross maintainable rent. xx
Net Maintainable Rent

Step-III.) Calculation of capitalized value:-
(a) If the house is constructed on his own land:-
Net Maintainable Rent X 12.5
(b) If the house is constructed on leasehold land
(i) If the period of lease is 50 years or more:-
Net Maintainable Rent X 10
(ii) If the period of lease is less than 50 years:-
Net Maintainable Rent X 8
Capitalized Value
Note:-
(I) If the house was constructed or acquired before 1
st
April, 1974, then the
capitalized value of net maintainable rent would be the value of the house.
(II) If the house was constructed or acquired after 31
st
march, 1974 The
capitalized value or purchase price (including the cost of improvement)
whichever is higher of the two shall be taken to be the value of the house

Step-IV.) Adjustment Regarding Unbuilt Area:-
Add- If the difference between actual unbuilt area and specified area:-
(i) More than 5% of aggregate area but not more than 10% =20% of Cap. Value
(ii) More than 10% of aggregate area but not more than 15% =30% of Cap. Value
(iii) More than 15% of aggregate area but not more than 20% =40% of Cap. Value


Step-V.) Deduction For Unearned Increase :-
(i) Specified amount or that part of unearned increase which is payable to the
authority
Or
(ii) 50% of the value determined above (Whichever is less)
VALUE OF ASSETS
(XX)
XX









XX











XX







XX

Note:-
1. Unbuilt area:-
(a) Aggregate area:- Aggregate area means the total area of the plot on which
building is constructed and the unbuilt area;
(b) Specified area:- Specified area in relation to the plot of land on which the
property is constructed means:-
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(i) If the property is situated at Bombay, Calcutta, Delhi or Madras, 60% of
the aggregate area;
(ii) If the property is situated at Agra, Ahmadabad, Allahabad, Amritsar,
Bangalore, Bhopal, cochin, Hyderabad, Indore, J abalpur, J amshedpur,
Kanpur, luck now, Ludhiana, Madurai, Nagpur, Patna, Pune, Salem,
Sholapur, Srinagar, Surat, Tirucherapali, Trivandrum, Vadodara, or
Varanasi 65% of the aggregate area;
(iii) Where the property is situated at any other place, 70% of the aggregate
area.
2. Unearned Increase l ini house property i sale ni Lease | i ili
Government - deposit i| r r Unearned Increase rin| r | ; Total value
- Less n |

3. i ii - Land, Free Hold Land -ii ini |

4. -ii ii - Remaining Lease Period 50 Year li -in |

5. Repair Actual Expenses - ri i ii ri r-ii Actual Rent i 1/9 Add
n|

6. Rent Receive i Receivable | House property l z month | n | l
House property 9 Month Let Out r, ni i| z month | lin i 2/3 iin l
let out r ni 3/2 iin n |

7. l Owner deposit Actual Interest pay ni | ni 15% Less n | l
Interest due rni ni Less r| li ini |

(3) Valuation of Business Assets:- Where the assessee is carrying on business and
maintains accounts regularly, the net value of the assets of the business as a whole,
having regard to the balance sheet of such business on the valuation date, shall be
computed as follows :

(a) Assets shown in the balance sheet :-
(i) In case of depreciable assets written down value shall be taken ;
(ii) If the asset is not depreciable, then its book value shall be taken; and
(iii) Value of closing stock shall be taken at a price which is adopted for
the purposes of assessment under the income tax act.
(b) l Bussiness Assets | Market Price , Cost ii W.D.V. za% li r ni
Market Price i add n ii cost i Wealth -in |

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(4) Valuation Of Firm Assets :- - wealth tax i payment r| n| r| l~ -
| wealth i partners - i- taxable li ini r|
1. Partners | Total Capital i Wealth, Capital Ratio - i-| in||
2. l Capital li Wealth ri ni Surplus Dissolution Ratio - i-n|
3. l li- i in r| li ri ni Profit Sharing Ratio - i-n| nii r i| r|
li ri ni Surplus i i-n|
4. - in Wealth - lr-i +partner | individual wealth ii | total wealth
tax ini|

Note:l - i residential House r ni r partners - deemed wealth -

taxable rini| nii partner House property i sec. 5(vi) - exemption n r|

Net wealth of partner located in India =
Net wealth located in India
-------------------------------- X Value of partners interest in the firm
Total net wealth of the firm

(5) Valuation of life Interest:- l i; ln l| i| Trust | Life Time l
income in i Right ini r ni Income i Life Interest |
Calculation | in| r |
1. Average 3 years | Income n l n| i | Income r| r ni Two Years | n |
2. Income in Expenses Less n i Actual i 5 % of average income ( which
ever is Less) rin |
3. ini | Age i | Life interest | Value | rin|| i Net income
Multiply n |
4. Trust | actual wealth or life interest | Value i ii - ri Wealth tax n |

1
Value of Life Interest = ------------------- -1
P+d
i
1. d= --------
1+ i
2. P=annual premium of whole life policy without profit
3. I=Interest Rate