While Income tax is payable on the total taxable
Income earned by an individual in one year, wealth
tax is paid on the possession of certain assets
which fall under the Wealth Tax Act of the Indian
taxation system. A wealth tax is a tax on the
accumulated stock of purchasing power, in contrast
to Income tax, which is a tax on the flow of assets
(a change in stock). Wealth tax is a direct tax
levied on the ownership of certain assets by
individuals and Hindu Undivided Families (HUFs) even
though these assets may not generate any Income. It
is governed by the Wealth Tax Act, 1957.
Under the Act, the tax is charged in respect of
the wealth held during the assessment year by the
Hindu Undivided Family (HUF)
ignore Wealth Tax?
Penalties related to ignorance of wealth tax are
much more severe as compared to that of Income tax.
Remember that ignoring wealth tax can lead to
serious problems for a taxpayer, with the penalty
ranging from 100% to 500% of the unpaid tax, and in
extreme cases, even jail.
What is Taxable?
The assets which are taxable under the Wealth Tax
Residential property other than one house
Cars (unless used for commercial hiring)
Precious metals including those in the form of
Air crafts, yachts, boats
Cash in hand in excess of Rs 50,000.
In addition to these, all assets transferred by
individuals to their minor children and to a spouse
for inadequate consideration also attract wealth
tax. cases, even jail.
What is exempt from
Following assets are exempt from the purview of
any one residential property
financial assets like shares, mutual funds,
any outstanding loan taken to buy the asset
any residential properties which are rented
for at least 300 days in a year. Remember that
the rental income from such property is
counted under Section 24 as "Income from
House Property" and taxed under Section 24.
In India, the extent of taxable wealth for
individuals differs with their residential status.
For resident Indians, net taxable wealth will
include all assets in India and abroad whereas for
non-resident Indians, net taxable wealth includes
only those assets which are in India.