NRI Taxation » Wealth Tax
Indian Wealth Tax Act contains the provisions relating to taxation of wealth of various persons. Under the Act, persons have been classified as Residents, Residents but not ordinarily resident in India and Non-Residents.
Taxable Assets
For the purpose of wealth tax, assets include the following:
- Guest house, residential house or commercial building
- Motor cars
- Jewellery, bullion, utensils of gold, silver, or other precious metals
- Yachts, boats and aircraft
- Urban land located within specified limits
- Cash in hand in excess of Rs.50,000/-
However, non-Residents are not chargeable to wealth tax in respect of their assets located outside India.
Exempted Assets
The following are not considered as assets for the purpose of wealth tax
- House allotted for residential purposes to a whole-time employee, officer or
director of a company, whose gross annual salary is less than
Rs.5,00,000/- - House occupied for the purpose of business or profession
- One house or a part of house used for residential purpose
- Property held under a trust
- Assets held as stock-in-trade in business
- Urban land on which construction is not permissible
- Co-parcenary interest in a Hindu Undivided Family (HUF)
- Certain specified government bonds
- Resurgent India Bonds
- NRI Bank Account Deposits and FCNR Deposits
- Assets belonging to Indian repatriates.
Deemed Assets
Assets as specified above and belonging to the non-resident are included in computing the net wealth. However, in certain cases, some assets which even though not belonging to the non-resident are included in his net wealth when they are held or are transferred with the intention to avoid wealth tax thereon. These are referred to as deemed assets, which include:
- Assets transferred by one spouse to another
- Assets held by minor child
- Assets transferred to a person or an association of persons
- Assets transferred under revocable transfers
- Assets transferred to close relatives
- Interest of a partner in a partnership firm
- Self-acquired property converted into joint family property
- Gifts made by mere book entries
- Other assets which otherwise would belong to the non-resident.
Net Wealth
Wealth tax is payable on the net wealth of a non-resident as on a particular date called the valuation date. Net wealth as on the valuation date is assessable to tax in the succeeding year referred to as the assessment year. Under the Indian tax laws, valuation date is 31st March of every year and the corresponding assessment year in relation to the valuation date is 1st April of that year to 31st March of the succeeding year.
Computation :
Net wealth of non-residents is computed by taking into account all the assets other than assets located outside India including deemed assets and deducting therefrom any liabilities / debts existing thereon. Only debts, which have been incurred in relation to assets, which are included in the taxable wealth, are eligible for deduction.
Tax Rate
Wealth tax is payable at the rate of 1% on the net wealth computed as above and exceeding Rs.15,00,000/- as on the valuation date.
Tax Return
Non-residents who are liable to pay wealth tax as above (i.e., where their net wealth exceed Rs.15,00,000/-) are required to file wealth-tax return. The return shall be in Form 2A. The return should be filed on or before 31st July (applicable from the assessment year 2001-02) in respect of net wealth as on 31st March of that year.
Special Cases
A non-resident who is a citizen of India (NRI) or a person of Indian origin (PIO), when comes to India with the intention of permanently residing in India, is eligible for exemption from wealth tax in respect of certain assets. The exemption is available with respect to the following assets of the NRI / PIO:
- Moneys brought by him into India
- Value of assets brought by him into India
- Moneys standing to his credit in a NRE Account with a Bank in India as on the date of his return to India
- Value of assets acquired by him out of moneys specified in (a) and (c) above within one year prior to the date of his return and at any time thereafter.
The exemption is available for a period of seven successive assessment years commencing with the assessment year next following the date on which NRI / PIO returned to India.
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