The Tax PublishersSection C

PART E

WEALTH-TAX

CHAPTER X

CHARGE OF WEALTH-TAX

112. Tax on net wealth

(1) Subject to the provisions of this Code, every person, other than a non-profit organisation, shall be liable to pay wealth-tax on the net wealth on the valuation date of a financial year.

(2) The wealth-tax shall be charged in respect of the net wealth referred to in sub-section (1), on the valuation date of a financial year at the rate specified in Paragraph E of the Second Schedule in the manner provided therein.

(3) The liability to wealth-tax shall be discharged by payment of pre-paid taxes in accordance with the provisions of this Code.

(4) The wealth-tax charged under this section shall be collected after allowing credit for pre-paid taxes, if any, in accordance with the provisions of this Code.

FROM NOTES ON CLAUSES

Clause 112 provides that every person, other than a non-profit organisation, shall be liable to pay wealth-tax on his net wealth as on the valuation date of a financial year and such wealth-tax shall be charged at the rate specified in Paragraph V of the Second Schedule in the manner provided therein.

The said clause further provides that the liability to wealth-tax shall be discharged by payment of pre-paid taxes and the wealth-tax charged under this clause shall be collected after allowing credit for such pre-paid taxes, if any, in accordance with the provisions of this Code.

113. Computation of net wealth

(1) The net wealth of a person referred to in sub-sections (1) and (2) of section 112 shall be the amount computed in accordance with the formula--

A-B

Where

A = the aggregate of the value on the valuation date, of all the specified assets, wherever located, belonging to the person referred to in this section, computed in accordance with the provisions of sub-section (5);

B = the aggregate of the value on the valuation date, of all the debts, owed by the person, which have been incurred in relation to the specified assets.

(2) The specified assets referred to in sub-section (1) shall be the following, namely:--

(a) any building or land appurtenant thereto (hereinafter referred to as 'house'), used for any purpose;

(b) any farm house situated within twenty-five kilometers from local limits of any municipality or municipal corporation (by whatever name called) or a Cantonment Board;

(c) any urban land;

(d) motor car, yacht, boat, helicopter and aircraft other than those used by the assessee in the business of running them on hire or as stock-in-trade;

(e) jewellery, bullion, furniture, utensils or any other article made wholly or partly of gold, silver, platinum or any other precious metal or any alloy containing one or more of such precious metals, other than those used by the assessee as stock-in-trade;

(f) archaeological collections, drawings, paintings, sculptures or any other work of art;

(g) watch having value in excess of fifty thousand rupees;

(h) cash in hand, in excess of two lakh rupees, of individuals and Hindu undivided families;

(i) deposit in a bank located outside India, in case of individuals and Hindu undivided families, and in the case of other persons any such deposit not recorded in the books of account;

(j) any interest in a foreign trust or any other body located outside India (whether incorporated or not) other than a foreign company; and

(k) any equity or preference shares held by a resident in a controlled foreign company, as referred to in the Twentieth Schedule.

(3) The specified assets referred to in sub-section (2) shall not include the following, namely:--

(a) 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 under paragraph 13 of the Merged States (Taxation Concessions) Order, 1949, or paragraph 15 of the Part B States (Taxation Concessions) Order, 1950;

(b) jewellery in the possession of any Ruler, not being his personal property, which has been recognised as his heirloom---

(i) by the Central Government before the commencement of the Wealth Tax Act, 1957 (27 of 1957), as it stood before the commencement of this Code; or

(ii) by the Board at the time of his first assessment to wealth-tax under the Wealth Tax Act, 1957 (27 of 1957), as it stood before the commencement of this Code;

(c) the value of the assets located outside India, if the person is a non resident; and

(d) any one house or part of a house or one vacant plot of land not exceeding five hundred square metres of area belonging to an individual or a Hindu undivided family.

(4) The house referred to in clause (a) of sub-section (2) shall not include the following, namely:--

(a) a house meant exclusively for residential purposes allotted by a company to an employee;

(b) any house for residential or commercial purposes which forms part of stock-in-trade;

(c) any house which the assessee may occupy for the purposes of business carried on by him;

(d) any house that has been let-out for a minimum period of three hundred days in the financial year;

(e) any house in the nature of commercial establishments or complexes.

(5) The value of any specified asset, other than cash, referred to in sub-section (2), shall be determined in such manner as may be prescribed.

(6) In this Chapter, 'valuation date' means the 31st day of March in the financial year.

FROM NOTES ON CLAUSES

Clause 113 provides the manner in which the net wealth is to be computed. For the sake of simplicity, the manner has been expressed as a formula. The formula provides that the net wealth shall be the aggregate value of all the specified assets of the person on the date of valuation as reduced by the aggregate value of all the debts owed by the person, which have been incurred in relation to the specified assets.

The said clause further provides a detailed list of all the specified assets and also lists out certain assets that shall not be treated as specified assets for the purposes of this clause. It also lists the categories of houses which shall be excluded from the specified asset, being 'house'.

The clause also provides that the value of any specified asset, other than cash, shall be determined in such manner as may be prescribed and clarifies that the term 'valuation date' means the 31st day of March in every financial year.

FROM MEMORANDUM REGARDING DELEGATED LEGISLATION

Clause 113 of the Bill provide that in relation to computation of net wealth for the purposes of targeability of wealth-tax, the value of any specified asset, other than cash, referred to in the said clause, shall be determined in such manner as may be prescribed.

Accordingly, it is proposed to empower the Central Government to make rules in this regard for the purposes of this clause.

114. Net wealth to include certain assets

(1) The specified assets referred to in sub-section (2) of section 113 shall be deemed to be belonging to the person, being an individual, and included in computing his net wealth if such assets, as on the valuation date, are held (whether in the form they were transferred or otherwise),--

(a) by the spouse of such individual to whom such asset has been transferred by him, directly or indirectly, otherwise than for adequate consideration or in connection with an agreement to live apart;

(b) by a minor child, not being a person with disability or person with severe disability, of such individual;

(c) by a person to whom such asset has been transferred by the individual, directly or indirectly, otherwise than for adequate consideration for the immediate or deferred benefit of the individual or his spouse;

(d) by a trust to whom such asset has been transferred by the individual, if the transfer is revocable during the life time of the beneficiary of the trust;

(e) by a person, not being a trust, to whom such asset has been transferred by the individual, if the transfer is revocable during the life time of the person; and

(f) by a Hindu undivided family by way of any converted property.

(2) The provisions of sub-section (1) shall not apply in respect of such specified asset as has been acquired by the minor child out of his income referred to in clause (b) of sub-section (1) of section 9 and which are held by him on the valuation date.

(3) In this section,--

(a) the asset referred to in clause (b) of sub-section (1) shall be included in the net wealth of--

(i) the parent who is the guardian of the minor child; or

(ii) the parent whose net wealth (excluding the assets referred to in that clause) is higher, if both the parents are guardians of the child;

(b) a transfer shall be deemed to be revocable if--

(i) it contains any provision for the re-transfer, directly or indirectly, of the whole or any part of the income or asset to the transferor; or

(ii) it, in any way, gives the transferor a right to re-assume power, directly or indirectly, over the whole or any part of the income or asset;

(c) the person shall, notwithstanding anything in this Code or in any other law for the time being in force, be deemed to be the owner of a building or part thereof, if he is a member of a co-operative society, company or other association of persons and the building or part thereof is allotted or leased to him under a house building scheme of the society, company or association, as the case may be;

(d) the holder of an impartible estate shall be deemed to be the individual owner of all the properties comprised in the estate; and

(e) the value of any assets transferred under an irrevocable transfer shall be liable to be included in computing the net wealth of the transferor in the year in which the power to revoke vests in him.

FROM NOTES ON CLAUSES

Clause 114 provides that if the specified assets are held by certain relatives, such as spouse or minor child, associates or associated entities of a person, then they shall be deemed to be belonging to such person if they fulfill certain conditions specified therein and shall be charged to wealth-tax in his hands.

The said clause further provides that if a minor child holds a specified asset which has been acquired from his own income, it shall not be deemed to be belonging to his parent or parents.

SUBSCRIBE TaxPublishers.inSUBSCRIBE FOR FULL CONTENT

TaxPublishers.in

'Kedarnath', 7, Avadh Vihar, Near Nirali Dhani,

Chopasni Road

Jodhpur - 342 008 (Rajasthan) INDIA

Phones : 9785602619 (11 am - 5 pm)

E-Mail : mail@taxpublishers.in / mail.taxpublishers@gmail.com