What is Wealth Tax?
A wealth tax is a tax charged on the net worth of an assessee. A wealth tax also known as net worth tax, capital tax, or equity tax falls under the category of direct tax as it is charged on the total value of assets held by an entity. A wealth tax is imposed on a wide range of assets including cash, bank balance, real estate, stocks, bonds, jewelry, pension plans, money funds, and other valuable properties. A wealth tax was charged at a rate of 1% on earnings of over ₹30 lakh p.a. earlier, but after the 2015-16 Union Budget, a surcharge from 2% to 12% is levied according to the worth of an assessee. However, it should be noted that assessees who are liable to pay wealth tax include Individuals, Companies, and Hindu Undivided Families (HUF). A partnership is not liable to pay this tax because the assets of the firm are taxable in the hands of partners individually. Moreover, cooperative societies, social groups, political parties, the Reserve Bank of India (RBI), and companies under section 25 of the Companies Act shall not be liable to pay a wealth tax.
Geeky Takeaways:
- A wealth tax is a direct tax levied on the net value of the assets held by an assessee on 31st March of every year.
- Wealth Tax is charged on a wide range of assets like cash, bank, real estate, pension funds, vehicles, etc.
- In India wealth tax was governed by the Wealth Tax Act 1957 and a tax of 1% was charged on earnings of over ₹30 lakh p.a until 2015. After that surcharge is levied instead of wealth tax at a rate starting from 2%.
- Assessees liable to pay wealth tax include only, Individuals, Companies, and HUFs.
- The aim of levying a wealth tax was to reduce the inequalities between the rich and the poor.
Table of Content
- Example of Wealth Tax
- Significance of Wealth Tax
- Provisions of Wealth Tax in India
- Basic Provisions in Wealth Tax
- Wealth Tax Exemptions
- Calculation of Wealth Tax
- Wealth Tax Rates
- Why Wealth Tax has been Abolished?
- Pros of Wealth Tax
- Cons of Wealth Tax
- Difference between Income Tax and Wealth Tax
- Frequently Asked Questions (FAQs)