WEALTH TAX

• With the latest proposal in the Union Budget to impose one per cent wealth tax on agriculture land falling within 8 km of municipal limits turning into a political hot button issue, Union Finance Minister P Chidambaram assured that the Centre would not impose wealth tax on agricultural land in the country.

 WEALTH TAX:

• Wealth tax is a direct tax, which is charged on the net wealth of the assessee.
• It is a tax on the benefits derived from ownership of property. The tax is to be paid year after year on the same property on its market value, whether or not such property yields any income.
• Wealth tax, in India, is levied under Wealth-tax Act, 1957.

•   The assets chargeable to wealth tax are :-

1. Guest house, residential house, commercial building
2. Motor car
3. Jewellery, bullion, utensils of gold, silver etc
4. Yachts, boats and aircrafts
5. Urban land
6. Cash in hand(in excess of 50,000), only for Individual & Hindu Undivided Family (HUF)

 The following will not be included in Assets :-

• Any of the above if held as Stock in trade.
• A house held for business or profession.
• Any property in nature of commercial complex.
• A house let out for more than 300 days in a year.
• Gold deposit bond
• Wealth tax is not levied on productive assets, hence investments in shares, debentures, UTI, mutual funds, etc are exempt from it

 WEALTH TAX ISSUE:

• As part of the Chelliah Committee recommendations, the wealth tax on unproductive assets was levied in 1992. These assets included farmhouses, motor cars (except those not used for earning livelihood), yachts, boats
• Finance Act 1992 excluded some lands while defining what urban land is
• The exempted list, however, had no mention of agriculture land. As the farmland was not exempted, income tax officials are free to assess tax on farm land within notified municipal limits and around cities

 FINANCE BILL 2013:

• Wealth tax won’t be levied on agricultural land even if it is located in the vicinity of urban centres within municipal limits. The government made this clear in the Lok Sabha by introducing an amendment to the Finance Bill 2013 and stating that wealth tax was to be imposed only on urban lands.

• Urban lands did not include agricultural lands registered as such in state records and used for agricultural purposes.