In India, the Wealth Tax Act of 1957 was enacted to help minimise wealth inequalities. Applied to the net worth of super-rich individuals, this tax helped bridge a part of this gap but was later abolished in 2015.
Most people wonder if wealth tax is a direct or indirect tax. Wealth tax in India was a direct tax levied on the taxpayer's wealth. This tax was charged at a 1% rate on the net worth (as of 31st March) for individuals/HUFs/companies. Entities with a net worth of more than Rs. 30 Lakhs per annum were liable to pay a wealth tax.
Now that you know the meaning of wealth tax, it's time to review some of its basic provisions and rules.
Items that don't match the definition of 'assets' mentioned under Section 2 (ea) of the Wealth Tax Act are excluded from wealth tax. Here's the list of exclusions under the Act:
Due to low compliance and high tax collection expenses, the Indian government finally decided to end wealth tax and replace it with a surcharge on the super-rich. With this mandate, the surcharge on super-rich taxpayers was hiked from 2% to 12%.
While this increased surcharge is payable by the super-rich category, you still have to meet your regular income tax burden as a common taxpayer. Since tracking your expenses can be a challenge, you can use the Fi Money app. This money management platform will help you Know Your Money & Grow Your Money.
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No. Starting from FY 2014-15, the Indian government abolished wealth tax in the country, replacing the same with a surcharge provision.
As defined by the Act, wealth tax in India was applicable on jewellery, cars, boats, yachts, land, and other assets. This tax was payable only if the taxpayer's net worth exceeded Rs. 30 Lakhs.
As per the IMF (International Monetary Fund), there are two types of wealth taxes - general wealth tax and wealth transfer tax. The former applies to wealth accumulated by the individual, while the latter applies to the transfer of wealth resulting from inheritance.
Wealth taxes come with the following downsides: