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Wealth tax helped tax the net worth of super-rich Indians, creating income equitability. Read on to find out more about this abolished tax.

What is Wealth tax, and what are the rules?

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"What is Wealth tax, and what are the rules?"

Anoop Menon

From budgeting to expenses management and everything in between

<p>
    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.
   </p><h2>
    <strong>
     Wealth Tax Meaning, Rate, and Calculation
    </strong>
   </h2><p>
    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.
   </p><h2>
    <strong>
     Wealth Tax Rules
    </strong>
   </h2><p>
    Now that you know the meaning of wealth tax, it's time to review some of its basic provisions and rules.
   </p><ul role="list">
    <li>
     Individuals, HUFs, and companies were liable to pay wealth tax in India.
    </li>
    <li>
     Resident individuals, HUFs, and companies had to pay wealth tax on their assets in India and abroad. Non-resident Indians were liable to pay wealth tax only on their Indian assets.
    </li>
    <li>
     Partnership firms don't have to pay wealth tax, but total asset values are calculated and distributed among partners based on their profit-sharing ratio. This was then subject to wealth tax in the hands of the partners.
    </li>
    <li>
     These entities were exempted from paying a wealth tax:
    </li>
    <li>
     Companies registered under Section 25 of the Companies Act.
    </li>
    <li>
     Co-operative societies
    </li>
    <li>
     Political party
    </li>
    <li>
     Social club
    </li>
    <li>
     Mutual funds mentioned under Section 10(23D) of the Income Tax Act
    </li>
    <li>
     RBI
    </li>
    <li>
     Assets included under the Act:
    </li>
    <li>
     Land or buildings used for residential and commercial purposes.
    </li>
    <li>
     Non-commercial boats, yachts, and aircraft.
    </li>
    <li>
     Jewellery, bullion, utensils, and furniture made from gold, silver, platinum, or any other precious metal.
    </li>
    <li>
     Personal-use cars.
    </li>
    <li>
     Urban land as defined by the Act's specifications.
    </li>
    <li>
     More than Rs. 50,000 cash-in-hand amounts.
    </li>
   </ul><h2>
    <strong>
     Assets Excluded from Wealth Tax
    </strong>
   </h2><p>
    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:
   </p><ul role="list">
    <li>
     One house per individual/HUF/company not exceeding 500 sq. metres.
    </li>
    <li>
     Residential properties that are rented out for at least 300 days a year.
    </li>
    <li>
     Property held under a trust for a religious or charitable public purpose.
    </li>
    <li>
     Certain assets of a non-resident Indian permanently returning to India (based on the fulfilment of specific terms).
    </li>
    <li>
     Vehicles used for hire.
    </li>
    <li>
     Jewellery of a former Princely State Ruler that's not classed as personal property by the Central Government.
    </li>
    <li>
     Land and buildings offered as residential houses by the employer; a stock-in-trade home; homes used for business or professional use by the taxpayer.
    </li>
    <li>
     Stock-in-trade assets.
    </li>
   </ul><h2>
    <strong>
     Conclusion
    </strong>
   </h2><p>
    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%.
   </p><p>
    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 &amp; Grow Your Money.
   </p><p>
    Fi's
    <a href="https://fi.money/features/ask-fi" target="_blank">
     AI-powered Analyser
    </a>
    can provide insights to help track your expenses: Analyse your spends by Merchants/Brands, Categories (like Food, Entertainment) &amp; by Time (daily/monthly spends). FYI: Fi also provides thoughtful, non-intrusive nudges to help you maximise your savings/investments. Want to know your credit score? The Insights Hub on our Analyser can do that too. This is why over 2.5 million people trust Fi to get a 360-degree view of their money.
   </p><h2>
    <strong>
     Frequently Asked Questions
    </strong>
   </h2><h3>
    <strong>
     1. Do we have a wealth tax in India?
    </strong>
   </h3><p>
    No. Starting from FY 2014-15, the Indian government abolished wealth tax in the country, replacing the same with a surcharge provision.
   </p><h3>
    <strong>
     2. What are wealth tax examples in India?
    </strong>
   </h3><p>
    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.
   </p><h3>
    <strong>
     3. What are the kinds of wealth tax?
    </strong>
   </h3><p>
    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.
   </p><h3>
    <strong>
     4. What is the downside of a wealth tax?
    </strong>
   </h3><p>
    Wealth taxes come with the following downsides:
   </p><ul role="list">
    <li>
     Challenging to administer
    </li>
    <li>
     It can result in greater tax evasion
    </li>
    <li>
     Implementing the tax is pretty difficult
    </li>
    <li>
     It can result in the illegal migration of wealth from the country
    </li>
   </ul>

What is Wealth tax, and what are the rules? | Fi Money

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