One has heard the famous saying “Wealth is the ability to fully experience life”. After the wealth is garnered when it is time to sit down and enjoy it a familiar problem comes along. Taxes or in this case wealth tax. ” In this World nothing is certain but death and taxes”. One neglects wealth tax as he believes the Government does not seriously pursue this cause and one believes he can escape without paying the wealth tax. The consequences of not paying wealth tax are severe. One would be punished with a hefty fine or in extreme cases even imprisonment. Still think one should neglect wealth tax?
Wealth tax is levied on what are non productive assets. One may own assets such as gold or a car used for personal consumption. One may have two or more properties which are locked up and not given on rent. Such wealth is deemed non productive to the economy and there is no economic benefit for the society at large from these assets. Wealth tax is a taxation levied on one’s non productive assets if their market value exceeds INR 30 Lakhs. One is charged tax at the rate of 1% on the market value of the assets which exceeds INR 30 Lakhs. Any outstanding loan such as a home loan is deducted before wealth tax is computed. The valuation date for wealth tax is 31st March of the financial year. One needs to file his wealth tax returns every year before July 31st. If wealth tax is computed for the period of April 1st 2012 to March 31st 2013 then it needs to be filed before July 31st 2013.One may have to pay a fine at the rate of 1% on the tax due for every month of delay. Penalty could be as high as 500% of the amount due and even a jail term up to 7 years if the tax evaded exceeds INR 1 Lakh.
Mr Ramesh has assets of Gold and ornaments, luxury watch, paintings, Second house not given on rent, motor car and cash in hand as shown in the table below. He also has an outstanding home loan liability as shown. How much wealth tax does he need to pay?
Table showing Mr Ramesh assets and liabilities :
Asset |
Cost (INR) |
|
Gold and ornaments |
15,00,000 |
|
Luxury Watch |
1,00,000 |
|
Paintings |
5,00,000 |
|
Second house not rented |
40,00,000 |
|
Outstanding loan for the house |
20,00,000 |
|
Motor Car |
8,00,000 |
|
Cash in Hand |
1,00,000 |
|
Total |
50,00,000 |
There is a famous saying “ Taxes grow without rain” .One needs to beware of his tax liability and make sure that all dues are paid on time to avoid paying more than what is due as a penalty. One needs to study his wealth tax and pay it on time. Remember always pay your wealth tax on time.
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