All about Wealth Tax
There will be tax occurrence on a number of things such as cars, jewellery and paintings.

Though most of us tend to focus on income-tax, there is another direct tax all of us are subject to -- the wealth tax. In fact, prior to 1998, another direct tax, the gift tax was also applicable, but it was discontinued. Then, the Finance Act, 2004, brought in what was effectively a gift tax through the back door, by way of income tax. The only difference was that the original gift tax was payable by the donor and the new income tax on gifts is payable by the recipient.

The wealth tax is levied on the benefits derived from asset ownership. The tax is to be paid on the market value of the same assets year after year, whether or not these yield any income. Every individual and Hindu Undivided Family whose net wealth (assets less liabilities incurred to acquire the assets) as on March 31 exceeds Rs 30 lakh is required to pay wealth tax at one per cent of the amount that exceeds Rs 30 lakh.

TAXING TIMES
How

* If there is a second house which is not being used for business, is stock-in-trade or rented for 300 days a year
* If the price of the car/s exceeds Rs 30 lakh for one individual
* If one owns ornaments of gold, silver and other precious metals, even if the sown into clothes or used as setting in furniture
* Cash balance in excess of Rs 50,000

Solutions
* Renting out the second property, if necessary, for a small rental
* If there are two cars, buy the second one in wife’s name
Note again that wealth tax is payable on the net wealth held as on March 31 of each year. This means it will be applicable on the asset even this was purchased only towards the end of the year. Conversely, those assets sold during the year and, consequently, not held as on March 31, will escape the levy of wealth tax.

The good news is that wealth tax is payable only on what are termed 'unproductive assets'. Consequently assets such as shares, securities, mutual funds and fixed deposits, the 'productive assets', are exempted. Though there is a long list of items such as yachts, boats, aircraft, etc, that are subject to wealth tax, for our purposes we shall only consider assets that are commonly owned such as real estate, jewellery and cars.

House property
Just like in income tax law, one house is exempt from wealth tax. In other words, ownership of more than one house will attract wealth tax liability on the second house onwards. There are three exceptions. If a property is used for conduct of business or a profession or if it forms a part of stock-in-trade or has been rented out for at least 300 days in the year, wealth tax is not applicable on such property.
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There will be tax occurrence on a number of things such as cars, jewellery and paintings.

Though most of us tend to focus on income-tax, there is another direct tax all of us are subject to -- the wealth tax. In fact, prior to 1998, another direct tax, the gift tax was also applicable, but it was discontinued. Then, the Finance Act, 2004, brought in what was effectively a gift tax through the back door, by way of income tax. The only difference was that the original gift tax was payable by the donor and the new income tax on gifts is payable by the recipient.

The wealth tax is levied on the benefits derived from asset ownership. The tax is to be paid on the market value of the same assets year after year, whether or not these yield any income. Every individual and Hindu Undivided Family whose net wealth (assets less liabilities incurred to acquire the assets) as on March 31 exceeds Rs 30 lakh is required to pay wealth tax at one per cent of the amount that exceeds Rs 30 lakh.

TAXING TIMES
How

* If there is a second house which is not being used for business, is stock-in-trade or rented for 300 days a year
* If the price of the car/s exceeds Rs 30 lakh for one individual
* If one owns ornaments of gold, silver and other precious metals, even if the sown into clothes or used as setting in furniture
* Cash balance in excess of Rs 50,000

Solutions
* Renting out the second property, if necessary, for a small rental
* If there are two cars, buy the second one in wife’s name
Note again that wealth tax is payable on the net wealth held as on March 31 of each year. This means it will be applicable on the asset even this was purchased only towards the end of the year. Conversely, those assets sold during the year and, consequently, not held as on March 31, will escape the levy of wealth tax.

The good news is that wealth tax is payable only on what are termed 'unproductive assets'. Consequently assets such as shares, securities, mutual funds and fixed deposits, the 'productive assets', are exempted. Though there is a long list of items such as yachts, boats, aircraft, etc, that are subject to wealth tax, for our purposes we shall only consider assets that are commonly owned such as real estate, jewellery and cars.

House property
Just like in income tax law, one house is exempt from wealth tax. In other words, ownership of more than one house will attract wealth tax liability on the second house onwards. There are three exceptions. If a property is used for conduct of business or a profession or if it forms a part of stock-in-trade or has been rented out for at least 300 days in the year, wealth tax is not applicable on such property.

For Example -
A person  has two houses and his parents live in one the  property, which is valued at over Rs 50 lakh. By way of tax planning, he has asked his parents to pay him a token rent of Rs 4,500 per month, thereby escaping the wealth tax liability. The rental income will be taxable in his hands but is lesser than the wealth tax liability that would otherwise be payable. Of course, the rent paid by his parents is returned back to them at the end of the year by way of a gift, as gifts between relatives is tax-free.

If this arrangement isn't possible, the house with the higher valuation can be claimed as exempt, leaving the one with the lower valuation subject to wealth tax.

Also note that wealth tax is applicable on net wealth, after deducting any liabilities or debt owed to acquire the assets. Therefore, if any house subject to wealth tax has been purchased using housing finance, the value of the loan due is deductible while arriving at the figure of net wealth.

Cars
The tax in this case would be applicable at the market price of the car. Exceptions are those used in a car-hire business. So, if you already own a car and intend to purchase another, such that the total value of your cars would go beyond Rs 30 lakh, buy in the name of your spouse or any other family member, such that wealth is spread and the optimum benefit of the basic exemption of Rs 30 lakh can be claimed.

Jewellery
In this case, these include ornaments made of gold, silver, platinum or any other precious metal and/or precious or semi-precious stones. Such items, even if sown into clothes or set into furniture, have to be considered for wealth tax purposes. Incidentally, cash in hand in excess of Rs 50,000 is also subject to wealth tax.

Finally
If you find yourself liable for wealth tax, merely transferring the asset to your spouse will not help. Clubbing provisions similar to those applicable in income tax law are also applicable in the case of wealth tax. Therefore, any assets gifted to spouse, minor child or son's wife will be, notwithstanding the gift, deemed to belong to the taxpayer.

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