Black Money row: Wealth Tax set to be modified to include foreign bank deposits

Deposits in foreign banks, paintings, sculptures and expensive watches may come under the wealth tax net as part of the government’s drive to unearth black money.

The proposal to expand the ambit of the Wealth Tax forms part of the Direct Taxes Code (DTC) Bill which is being scrutinised by a Parliamentary Standing Committee. Some of the proposals are likely to be incorporated in the Budget for 2012-13, pending approval of the DTC.

The Wealth Tax, as per the proposal, will be levied at one per cent on taxable assets (specified under Wealth Tax Act) exceeding Rs 1 crore. The current limit is Rs 30 lakh.

“For the purpose of levy of wealth tax, taxable assets have been defined to include deposits in banks located outside India in case of individual, unreported bank deposits in case of others...,” the Finance Ministry said in a note, adding this is one of “specific new measures for unearthing black money”.

The other assets which would be included for computing the wealth tax liability are - cars, yacht, helicopters, aircraft, jewellery, bullion, archaeological collections, paintings and sculptures. Watches exceeding Rs 50,000 apiece and cash in excess of Rs 2 lakh would also attract the Wealth Tax.

As regards the real estate, the DTC makes it clear that wealth tax will not be levied on residential houses, commercial premises and those immovable properties which are rented out for a minimum of 300 days in a financial year.

The value of other properties, including urban land and farm houses located within 25 kilometers of any municipal or Cantonment Board will be included while computing the tax liability on this count.

The wealth tax, the DTC said, will not be levied on land property and bullion of former rulers of the princely states.

The DTC also proposes a “reporting requirement ... making it obligatory on the part of resident assessees to furnish details of their investment and interest in any entity outside India,” the document said.

Besides, an assessee’s interest in a foreign trust or a company is also proposed to be made taxable assets under the new tax regime, it said.

The government is hoping for approval of measures by Parliament in the next fiscal. Pending Parliamentary nod, some of the provisions may be included in the Budget to be presented on March 16.

The Bill, introduced in the Lok Sabha in August 2010, proposes to overhaul the over 50-year-old Income Tax Act.

At present, wealth tax contributes a meagre amount to the government kitty. For the current fiscal, the only Rs 635 crore is targeted from this source out of the total tax revenue of Rs 9.32 lakh crore.