Filing of Wealth Tax Returns

Filing of wealth tax returns is done using the Form BA. The dates are the same as filing of income tax returns. Schedule III has to be referred for valuation of assets. Wealth tax and returns both have to be filed.

The Indian Income Tax Act requires citizens (individuals as well an enterprises) to pay taxes which fall under various tax categories. One major type of tax that applies to a lot of taxpayers is the wealth tax. According to the Wealth Tax Act, people are supposed to pay tax on the wealth assimilated by them. The term “wealth” refers to any unproductive asset such as motor cars, gold, silver, luxury cars etc. These articles, generally, do not earn any return and are only kept as assets in an individual’s name or a family’s name.

What is Wealth Tax?

Wealth tax is any tax that is paid by an individual on his or her net worth. This means that wealth tax is applicable on an individual’s assets minus the liabilities. Assets include anything like gold, silver, ornaments, bullions, cash over 30 lakh rupees and a lot of other financial instruments like pension plans, money funds etc. Wealth tax is computed on the current market value of the assets held by an individual, HUF or company.

The Indian government levies tax on the wealth of an individual. The rate of taxation of wealth tax is 1% if the assets are worth Rs.30 lakhs or more and in such cases wealth tax return needs to be filed.

Under the wealth tax act all assets belonging to the assessed on a particular valuation date are considered from which is subtracted all the liabilities in his/her name as on that particular date and then the wealth tax is levied on the net wealth calculated thus.

Assets that come under the purview of Wealth Tax:

Following is the list of things that fall under the purview of wealth tax.

  • Buildings or land other than one house property or piece of land less than an area of 500 square meters
  • Jewelry, bullions, ornaments and other precious metals
  • Cash that is held over and above Rs.50000
  • Motors, cars, aircrafts, yachts and boats

Financial assets such as mutual funds and shares are exempt from wealth tax.

Filing of Wealth Tax Return:

In case an individual’s assets cross Rs.30 lakhs, then she/he is required to file the wealth tax return for a particular financial year. The wealth tax act was formed and passed in the year 1957.

Wealth tax return is filed via form BA for individuals, HUFs as well as companies. The due dates applicable for filing of wealth tax returns are the same as those of income tax return filing. Valuation of assets is determined by referring Schedule III. This however, does not apply to cash assets. In case, the schedule expects any required document to be attached for further proof, then the same needs to be furnished by the taxpayer.

Who all are liable to pay Wealth Tax and File Wealth Tax Returns?

Any individual, company or Hindu Undivided Family, HUF is liable to pay wealth tax if the net assets in their name exceeds Rs.30 lakhs.

In case there are assets in the name of a minor, those are clubbed along with the net assets of his or her parents. However, in case the minor suffers from any disability specified under section 80U of the Income Tax Act, then no clubbing with parent’s assets is applicable.

Also, if there are assets to a child’s name which have arisen due to income earned by the child by application of his/her skill, special talent or knowledge, then to, the clubbing of assets with parents assets is not applicable.

What is the Due Date for Filing of Wealth Rax return?

Like the income tax return filing, wealth tax returns too need to be filed by 31st July every financial year.

What happens if an individual pays Wealth Tax but does not file Wealth Tax Returns?

In case an individual files wealth tax but does not file wealth tax return, he is liable to pay an interest rate of 1% per month for the entire period of delay. This is the late payment fee that is levied by the Income Tax Department for non-payment or late payment of wealth tax return.

Wealth Tax Returns for NRIs:

All non-resident Indians, either individuals or HUFs or companies are required to go through the wealth taxation process with the following points in mind.

  • Wealth tax for NRIs is applicable only on assets that they own in India
  • Similar to the asset class for resident Indians, NRIs also are required to pay wealth tax on assets like gold bullions, gold and silver jewelry, precious metals, land and houses held, yachts, motor sports etc.

Section 22 of the Wealth Tax Act, 1957 states that any Non-resident Indian does not necessarily need to be physically present for filing the wealth tax. He or she may appoint an agent who can do the filing of wealth tax return on his or her behalf.

Few Significant Points about Wealth Tax in India:

Here are a few important points with regards to payment of wealth tax in India. These points can be used in planning out your taxes in a better and effective way.

  • Wealth tax is only applicable to more than one house and hence, no matter how expensive your first house is, it does not attract any wealth tax
  • Wealth tax is levied only on unproductive assets and as such it does not apply to shares, mutual fund units, debentures etc.
  • All properties that are used for commercial purposes are exempt from wealth tax. This again stems from the fact that only unproductive assets are taxed and commercial properties are involved in productive processes.
  • Any house or flat that was rented in the previous year, for more than 300 days is exempt from wealth tax. So, in case you had rented out your second flat or house to somebody then you do not need to pay wealth tax on it and nor do you have to file wealth tax return for the same.

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