Wealth tax and why it was abolished

Reasons for its abolishment

• The assets owned by assesses had to be valued by a registered valuer in order which was an arduous job imposing the unnecessary burden of expenses on assesses.
• Assets like, jewelry, cash, and cars were not easy to be tracked
• Lack of awareness about the wealth tax among assesses
• Did not form a significant part of the total collection of Direct taxes in India.

Current Scenario

• -Individual, HUF, AOP, BOI, whether incorporated or not
• -Cooperative societies
• -Firms or local authorities

The strategy will help the government to achieve its objective of bringing more persons under the tax net as people who file returns under the normal income tax act are much higher than those who file under the wealth tax and to remove any scope of taking undue advantage of the loopholes of wealth tax.

A Wealth Tax also known as & lsquo Taxing one's riches' was a popular direct tax that was levied on individuals, HUFs, and companies whose net wealth exceeded Rs 30 lakhs on the valuation day. For the purpose of its calculation, only specified assets were taken into account. Such as:

• Jewellery, ornaments made of precious metals, precious or semi-precious stones
• Second-owned property that is not rented for more than 300 days in a year
• Farmhouse within the ambit of 25 km from local municipality limits
• Urban land having an area exceeding 500 sq. Mts.
• Commercial establishment.
• Owned car, boat, yacht, or any aircraft
• Cash exceeding Rs.50, 000/-

Abolishment of Wealth Tax

Finance Minister Arun Jaitley while announcing Budget 2015, abolished the tax and now has been completely removed from the financial year 2015-16 onwards. The loss of revenue will be now compensated by the levy of an additional surcharge on the higher income earning assessment.

Reasons for its abolishment

• The assets owned by assesses had to be valued by a registered valuer in order which was an arduous job imposing the unnecessary burden of expenses on assesses.
• Assets like, jewelry, cash, and cars were not easy to be tracked
• Lack of awareness about the wealth tax among assesses
• Did not form a significant part of the total collection of Direct taxes in India.

Current Scenario

The Wealth tax has been swapped with a higher tax on the super-rich in India. An additional surcharge of 2% is now levied on the income exceeding. 1 crore of:

• -Individual, HUF, AOP, BOI, whether incorporated or not
• -Cooperative societies
• -Firms or local authorities

The strategy will help the government to achieve its objective of bringing more persons under the tax net as people who file returns under the normal income tax act are much higher than those who file under the wealth tax and to remove any scope of taking undue advantage of the loopholes of wealth tax.

Advocate Chikirsha Mohanty

4.0 | 2+ user ratings Greater Kailash - 1, Delhi
5 years

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