When are you liable to pay wealth tax?

Updated: Monday, October 6, 2014, 13:28 [IST]

Not many individuals are aware of wealth tax and the liability arising thereof. For example, very few would know that if they own a car valued above Rs 30 lakhs, they need to pay wealth tax. Wealth tax is paid on wealth that is essentially unproductive.

* Here is a list of cases where wealth tax would apply:

* Cash balances in excess of Rs 50,000.

* Luxury cars whose value exceeds Rs 30 lakhs.

* Gold, silver, and bullion (even if the same are sewn into clothes or used as setting in furniture)

* If there is a second house which is not being used for business, is stock-in-trade or rented for 300 days a year

* Paintings

Wealth is generally defined as something that is an unproductive asset. Therefore, investments in productive assets like bank fixed deposits, mutual finds and other productive investment avenues would not come under the Wealth Tax and hence you would not be liable to pay wealth tax.

Tax at the rate of 1 per cent must be paid on wealth over Rs 30 lakh, which is calculated according to the provisions of the Act, and a wealth tax return has to be filed.

Individuals, Hindu Undivided Families and companies should file their wealth tax return in Form BA, which has to be signed by the assessee.
There are ways to avoid coming under the provisions of the act. For example, do not maintain cash balances of Rs 50,000. On the other hand if you have a second house, it is better to have it in the name of your spouse.

Restrain yourselves when it comes to gold and jewellery to that which is essential. If you have a penchant for luxury cars, then you might well shift to a lower version of the car, whose market value is less than Rs 30 lakhs.

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