Wealth Tax is a tax on the value of wealth owned by a person, levied under the Wealth Tax Act. The tax is levied @ 1 per cent on the amount of wealth as on 31st March of every year, where such amount exceeds Rs.15,00,000. This is similar to the basic exemption limit of Rs.1,00,000 provided under the Income Tax Act.

Earlier, there was no distinction between movable or immovable properties / productive or non-productive assets. However, the Finance Act, 1992, made drastic changes to the Wealth Tax Act, in order to tone down the rigorous implications of the law. Accordingly, at present, the law is applicable only to non-productive assets held by an assessee. The Wealth tax Act has differential treatment for property with building and a landed property for the levy of tax.

Net wealth to include certain assets

• In computing the net wealth - (a) of an individual, there shall be included, as belonging to that individual, the value of assets which on the valuation date are held - (i) by the spouse of such individual to whom such assets have been transferred by the individual, directly or indirectly, otherwise than for adequate consideration or in connection with an agreement to live apart, or
   

• by a minor child, not being a minor child suffering from any disability of the nature specified in section 80U of the Income-tax Act, or a married daughter, of such individual, or
   

• by a person or association of persons to whom such assets have been transferred by the individual directly or indirectly, otherwise than for adequate consideration for the immediate or deferred benefit of the individual, his or her spouse, or
   

• by a person or association of persons to whom such assets have been transferred by the individual otherwise than under an irrevocable transfer, or
   

• by the son's wife, of such individual, to whom such assets have been transferred by the individual, directly or indirectly, on or after the 1st day of June, 1973, otherwise than for adequate consideration, or
   

• by a person or association of persons to whom such assets have been transferred by the individual, directly or indirectly, on or after the 1st day of June, 1973, otherwise than for adequate consideration for the immediate or deferred benefit of the son's wife, of such individual or both, whether the assets referred to in any of the sub-clauses aforesaid are held in the form in which they were transferred or otherwise :
   

• Provided that where the transfer of such assets or any part thereof is either chargeable to gift-tax under the Gift-tax Act, 1958 (18 of 1958) or is not chargeable under section 5 of that Act, for any assessment year commencing after the 31st day of March, 1964, but before the 1st day of April, 1972 the value of such assets or part thereof, as the case may be, shall not be included in computing the net wealth of the individual :
   

• Provided further that nothing contained in sub-clause (ii) shall apply in respect of such assets as have been acquired by the minor child out of his income referred to in the proviso to sub-section (1A) of section 64 of the Income-tax Act and which are held by him on the valuation date :
   

• Provided also that where the assets held by a minor child are to be included in computing the net wealth of an individual, such assets shall be included, - (a) where the marriage of his parents subsists, in the net wealth of that parent whose net wealth (excluding the assets of the minor child so includible under this sub-section) is greater; or
   

• (b) where the marriage of his parents does not subsist, in the net wealth of that parent who maintains the minor child in the previous year as defined in section 3 of the Income-tax Act, and where any such assets are once included in the net wealth of either parent, any such assets shall not be included in the net wealth of the other parent in any succeeding year unless the Assessing Officer is satisfied, after giving that parent an opportunity of being heard, that it is necessary so to do;
   

• (b) of an assessee who is a partner in a firm or a member of an association of persons (not being a co-operative housing society), there shall be included, as belonging to that assessee, the value of his interest in the assets of the firm or association determined in the manner laid down in Schedule III :
  
  
       EXEMPTIONS IN RESPECT OF CERTAIN ASSETS
   

• Wealth-tax shall not be payable by an assessee in respect of the following assets, and such assets shall not be included in the net wealth of the assessee - (i) any property held by him under trust or other legal obligation for any public purpose of a charitable or religious nature in India :
   

• Provided that nothing contained in this clause shall apply to any property forming part of any business, not being a business referred to in clause (a) or clause (b) of sub-section (4A) of section 11 of the Income-tax Act in respect of which separate books of account are maintained or a business carried on by an institution, fund or trust referred to in clause (23B) or clause (23C) of section 10 of that Act;
   

• (ii) the interest of the assessee in the coparcenary property of any Hindu undivided family of which he is a member;
   

• (iii) any one building in the occupation of a Ruler, being a building which immediately before the commencement of the Constitution (Twenty-sixth Amendment) Act, 1971, was his official residence by virtue of a declaration by the Central Government 51 ] under Paragraph 13 of the Merged States (Taxation Concessions) Order, 1949, or Paragraph 15 of the Part B States (Taxation Concessions) Order, 1950;
   

• (iv) to (xiii) (iv) jewellery in the possession of any Ruler, not being his personal property, which has been recognised before the commencement of this Act, by the Central Government as his heirloom or, where no such recognition exists, which the Board may, subject to any rules that may be made by the Central Government in this behalf, recognise as his heirloom at the time of his first assessment to wealth-tax under this Act :
   

• Provided that in the case of jewellery recognised by the Central Government as aforesaid, such recognition shall be subject to the following conditions, namely :- (i) that the jewellery shall be permanently kept in India and shall not be removed outside India except for a purpose and period approved by the Board;
   

• (ii) that reasonable steps shall be taken for keeping the jewellery substantially in its original shape;
   

• (iii) that reasonable facilities shall be allowed to any officer of Government authorised by the Board in this behalf to examine the jewellery as and when necessary; and
   

• (iv) that if any of the conditions hereinbefore specified is not being duly fulfilled, the Board may, for reasons to be recorded in writing, withdraw the recognition retrospectively with effect from the date of commencement of clause (b) of section 5 of the Rulers of Indian States (Abolition of Privileges) Act, 1972 (54 of 1972) and in such a case, wealth-tax shall become payable by the Ruler for all the assessment years after such commencement for which the jewellery was exempted on account of the recognition.

Explanation

• For the purposes of clause (iv) of the foregoing proviso, the fair market value of any jewellery on the date of the withdrawal of the recognition in respect thereof shall be deemed to be the fair market value of such jewellery on each successive valuation date relevant for the assessment years referred to in the said proviso :
   

• Provided further that the aggregate amount of wealth-tax payable in respect of any jewellery under clause (iv) of the foregoing proviso for all the assessment years referred to therein shall not in any case exceed fifty per cent of its fair market value on the valuation date relevant for the assessment year in which recognition was withdrawn;
   

• Provided that this exemption shall apply only for a period of seven successive assessment years commencing with the assessment year next following the date on which such person returned to India.
   

• Explanation 1 : A person shall be deemed to be of Indian origin if he, or either of his parents or any of his grand-parents, was born in undivided India.
   

• Explanation 2 : For the removal of doubts, it is hereby declared that moneys standing to the credit of such person in a Non-resident (External) Account in any bank in India in accordance with the Foreign Exchange Regulation Act, 1973 (46 of 1973) and any rules made thereunder, on the date of his return to India, shall be deemed to be moneys brought by him into India on that date;
   

• One house or part of a house or a plot of land belonging to an individual or a Hindu undivided family :
   

• Provided that wealth-tax shall not be payable by an assessee in respect of an asset being a plot of land comprising an area of five hundred square meters or less.