Amendments to Wealth Tax
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The exemption for wealth tax is raised from Rs 15 lakh to Rs 30 lakh, writes C.H.Gopinatha Rao
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The Ministry of Finance has proposed amendments towards payment of wealth tax. The exemption for wealth tax is raised from Rs 15 lakh to Rs 30 lakh and will apply on the valuation of net wealth as on March 31, 2010. The proposals also exclude some of the categories of assets from being considered for computing the tax amount.
Implications
Wealth Tax is levied on the net wealth of an assessee on the valuation date or each assessment year. From April 1, 1993, the charges levied are 1 per cent of the amount by which the net wealth exceeds Rs. 15 lakhs and the assessees will include individual, Hindu Undivided Family (HUF) and companies.
The term assets include the following types of immovable properties such as guest house, a residential house unless it is used exclusively for residence of company employees. Farm house located within 25km of the local limits of a municipality and urban land that is land within the jurisdiction of a municipality are also considered assets.
As per schedule III (Rule 3) of the Wealth Tax Act, the value of any immovable property being a building or land appurtenant thereto or part, is arrived at by multiplying the rent the property fetches by 12.5. In cases where the property is not let out, the amount of annual rent assessed by the local authority for the purpose of property tax is adopted. However this method is not applicable for properties that exceed Rs, 50 lakhs.
Since most of the properties in cities such as Chennai or Delhi exceed more than Rs. 50 lakhs in value, Rule 3 cannot be adopted for computing wealth tax. In such cases the wealth tax is arrived at by adopting the market value.
Now the limits have been raised from.Rs.15 lakh to Rs.30 lakh. Hence many properties in the metros will have more to gain as the tax will be calculated for the amount that exceeds Rs.30 lakh. Many lower end properties can escape the tax net.
In addition, the following immovable properties are exempted . Urban land where construction of a building are prohibited under any law, land held by assessee as sock-in-trade (like promoters buying land for selling after making layout or for development of flats for sale) for a specific period and any unused land for industrial purposes for a specific period , any residential property let out at least 300 days in a previous year, any house occupied by the assessee for the purpose of business or profession, one house or part of a house or a plot of land belonging to an individual provided the plot of land comprises an area up to 500 sq.m.
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