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Wealth Tax & Customs

Duty
Wealth Tax
W e a lth
• Ta x
Basically Wealth tax is chargeable to Net wealth
• Net wealth in excess of Rs.15 Lacs (PY 09-10: Rs. 30 Lacs) is
chargeable to wealth tax @ 1%.
• Net wealth for this purpose is computed as follows
Particulars Amt.
Assets u/s 2(ea) xxx
+ Deemed Assets (u/s 4) xxx
xxx
(-) Exempted assets (u/s 5) (xxx)
Assets Chargeable to wealth tax xxx
(-) Debts own (u/s 2(m)) (xxx)
Net Wealth xxx
Wealth tax liability
First : exempt up to Rs.15,00,000 (09-10: Rs. nil
30,00,000) xxx
Next : @1%
Wealth of Net wealth
Tax payable xxx
W h o p a y s w e a lth
ta x ?
• Net wealth is chargeable to wealth tax in the
immediately following assessment year
• An Individual
• HUF
• A company

• U/S-45, no wealth tax is chargeable in respect of Net
wealth of :
• Any co. registered u/s-25 of the companies act 1956
which is floated to promote commerce, art,
science, charity without any profit motive.
• Any co-operative society [sec45(g)]
• Any social club [sec45(h)]
• Any political party [sec45(i)]
• A m u tu a l fu n d sp e cifie d u / s-1 0 ( 2 3 D ) o f th e In co m e
ta x a ct [sec45(j)]
Assets [2(ea)]
• Guest house, residential house or commercial
building u/s 2 (ea) (i)
• Any building or land whether used for commercial
or residential purposes or for the purpose of
guest house
• A farm house situated within 25 k.m. from the
local limits of any municipality or a cantonment
board
Exceptions

• If following conditions are satisfied


• A house is not treated as “Assets”—
• It is meant exclusively for residential purposes
• It is allotted by a company to an employee or an
officer or a director who is in full time
M o to r C a r-[ u / s 2 ( e a ) ii]
•For this purpose, “motor car” covers all motor
vehicles other than heavy vehicles.
•Exceptions

• Motor car used by the assessee in the business of


running them on hire
• Motor cars treated as stock in trade
In case of leasing company motor car is an asset

• Where an assessee had admittedly purchased a car,


merely because in view of some dispute with seller it
has not been registered in the assessee’s name, the
assessee can’t plea that car is not includible in its
taxable wealth
a n d a n y o th e r ite m s m a d e o f G o ld , S ilv e r e

• Any of such article made fully or partially of


gold, silver, platinum or any other precious
metal
or
• Any alloy containing one or more of such
precious metals are treated as “assets”
Exceptions
• Stock in trade not an asset
• Gold deposit bonds are not asset
URBAN LAND [ u / s - 2 ( ea ) ( v )]
• An urban land is an asset whether it is agricultural
land or non agricultural land.

• It refers to a land situated in following areas:
• Land situated within municipality area
• Land situated outside municipality area (Not more than
8 k.m.)

Exceptions

• On which construction of building is not permissible


• On which construction is done with the approval of
authority
• Any unused land held by the assessee for industrial
purposes for a period of 2 years from the date of its
acquisition.
Cash in Hand

• Individual & HUF


• Cash in hand in excess of Rs. 50,000 is taxable
• If cash in hand is Rs. 80,000 only (80000-
50000)=30000 is chargeable to wealth tax.

• Any other assessee
• Any amt not recorded in books of accounts is asset

DEEMED ASSETS [u/s-4]
1. Assets transferred by one spouse to another [u/s-4(1)-
(a)(i)]
2. Assets held by minor child
3. Assets transferred to a person or an association of
persons.
4. Assets transferred under revocable transfers
5. Assets transferred to son’s wife
11.Assets transferred for the benefit of son’s wife
12.Interest of partner [u/s-4 (1) (b)]
13.Conversion by an individual of his self acquired
property into joint property
14.Gifts by book entries
15.Property held by a member of housing society
ASSETS EXEMPT FROM TAX ( u / s - 5 )
• Property held under a trust
• Interest in the property of HUF for a family
member
• Residential building of a former ruler
• Former ruler’s jewellery
• Assets belonging to the Indian repatriates (send
back to domestic country)
•Debt owed(Due) [u/s/-2 (m)]

• The following two conditions should be satisfied to


get deduction of debt owed.
1. Only debt owed by the assessee on the valuation
date is deductible.
2. Debts should have been incurred in relation to these
assets which are included in net wealth of the
VALUATION OF ASSETS : Building
Particulars Amt Amt
Step 1: Gross maintainable rent xxx
Less : 1. Full amt of tax levied xxx
2. Standard deduction : 15% of gross maintainable xxx
rent
xxx (-) xxx
Step 2: Net maintainable rent xxx
Step 3: Capitalization = (Decided factor) x (Net xxx
maintainable rent)
Step 4: (step 3 +Premium) xxx
xxx
Step 5 : Deduct unearned increment (-) xxx
Value of house xxx
s maintainable rent i . e .

receivable by the owner


Or
perty as assessed by local authority

the local authority


Or
uated outside the jurisdiction of local authority)

er can reasonably be expected to receive as annual rent had s


Step 2 : Find out net maintainable rent
• It is calculated by deducting following from step 1
a) The amount of taxes charged by any local authority in
respect of property
• And
b)A sum equal to 15% of gross maintainable rent

Step 3 : Capitalization
C a p ita liza tio n ca n b e d o n e b y m u ltip lyin g th e n e t
m a in ta in a b le re n t b y a d e cid e d fa cto r a s p e r fo llo w s:
Case Factor
i In case of construction on lease hold land 12.5

ii In case of the lease period of such land is 50 years or more 10

iii In case lease period is less than 50 years 8


Cochin, Hyderabad, Indore, Jabalpur, Jamshedpur, Kanpur, Lucknow, Lud

tructed
Step 4 : Calculation of Premium
Excess of un-built area over specified area Premium

Not more than 5% of aggregate area Nil


5% to 10% of aggregate area 20%
10% to 15% of aggregate area 30%
15% to 20% of aggregate area 40%
More than 20% of aggregate area Rules of part-B Schedule -III Not
applicable
% of unbuilt area exceeding the specified area
Specified area : 60% of 150 sq yds 90 sq yds
Built-up area : 30% of 150 sq yds 45 sq yds
Unbuilt area : agg. area (150) – built-up area (45) 105 sq yds
Excess of unbuilt area over the specified area : (105 - 90) 15 sq yds
% of unbuilt area exceeding specified area over aggregate 10%
area: (15/150)x100
yable to the government or any authority at the time of trans

Or
Valuation of self occupied property -
u/s-7 (2)
• It is applicable if following conditions are
satisfied.
a)The assessee owns a house, being an
independent residential unit
b)It is used by the assessee exclusively for his
residential purposes throughout 12 months

House acquired/constructed after 31.03. 1974
•Capitalized value xxx
or
•cost of acquisition/ construction + cost of

improvement
xxx
Whichever is higher
Valuation of Assets of Business [Part D
schedule
Disclosed in BSIII]
Step 1: Value of Assets
Assets : (value) xxx
Depreciable assets : ( WDV)
Non depreciable assets : (Bo0k Value)
(other than stock in trade)
Closing stock : (Value for the purpose
of income tax)
Step 2: Add : 20% of the above stated values xxx
Step 3: Value of individual asset as per provisions of xxx
Schedule III
Step 4 : Take value of step 3 , if vale of Step 3 > xxx xxx
step2
otherwise
Takeinvalue
Undisclosed BS of step 1
value determined in accordance with the provisions of xxx
schedule III as applicable to that asset
• Custom Duty
Custom Duty


• Custom Duty is a tax which a state collects
on goods imported or exported out of
the boundaries of the country

• In India, Custom Duties are levied on the
goods and at the rates specified in the
schedules to The Custom Tariff Act, 1975
Custom Duty Is Levied On



• Import Of Goods


• Export Of Goods
Objectives Of Custom Duties


• Restricting imports for Conserving
Foreign Exchange
• Protecting Indian Industry from undue
competition
• Regulation Exports
• Prohibiting Imports and Exports of
goods for achieving the policy
objectives of the Government
• Co-ordinating legal provisions with
other laws dealing with foreign
Exchange
Types of custom duties

• Basic Duty
• Addition Duty
• Protective Duty
• Countervailing Duty
• Anti- dumping duty
• Safeguard Duty
• Education cess
• Export Duty

Rules
• Custom Valuation • Rule 6-Transaction
Rules, 1988 for value of similar
valuation of goods
imported goods • Rule 7-Deductive
that calculates the value
custom duty
• Rule 8-Residual
Payable
Method
• Rule 1- Ad valorem
• Rule 9-Cost & Services
rate
• Rule 10- Declaration
• Rule 2- Concepts
by Importer
• Rule 3-Method of
• Rule 11- Settlement of
valuation
Disputes
• Rule 4- Transaction
• Rule 12- Interpretative
Regulations


• The central board of excise and
customs has been empowered to
make regulations to carry out the
provisions of the act

• In order to maintain the rules of the
act several regulations like
Customs House Agents Licensing
Regulations, 1984 have been
framed
Notifications


• The Central Government may also
issue notification in the official
gazette for the purpose of the act.

• The notification is not considered to
be valid if it is not approved within
a span time of fifteen days
Increase


• 5% on Set top boxes

• Gold bars from 100 per ten grams to
200 per ten grams and on Gold
(excluding jewellery) from 250 per
ten grams to 500 per ten grams

• Silver (excluding jewellery) from


Rs.500 per kg to Rs.1,000 per kg

Reduction


• 10% to 5% on LCD Panels
• 7.5% to 5% on permanent magnets
• Nine specified life saving drugs from
10% to 5%
• Two specified life saving devices 7.5%
to 5%
• Wool waste and cotton waste from
15% to 10%
• Bio-diesel from 7.5% to 2.5%

Status Quo



• There is no change in the peak rate
of basic customs duty (10 %)


• No change in effective rate of
customs duty (24.42)

Exemptions


• CVD of 4 per cent to accessories,
parts and components imported for
the manufacture of mobile
phones(extended)