Wealth-tax under Wealth-tax Act, 1957
abolished wef Fy 2015-16
Wealth-tax Act, 1957 (‘the WT Act’) was
introduced w.e.f. 01.04.1957 on the recommendation of Prof. Nicholas Kaldor for
achieving twin major objectives of reducing inequalities and helping the
enforcement of Income-tax Act through cross checks.
Accordingly, all the assets of the assessees
were taken into account for computation of net-wealth. The levy of wealth-tax
was thoroughly revised on the recommendation of Tax Reform Committee headed by
Raja J. Chelliah vide Finance Act, 1992 with effect from 01.04.1993. The
Chelliah Committee had recommended abolition of wealth-tax in respect of all
items of wealth other than those which can be regarded as unproductive forms of
wealth or other items whose possession could legitimately be discouraged in the
social interest.
Currently, wealth-tax is levied on an
individual or HUF or company, if the net wealth of such person exceeds Rs.30
lakh on the valuation date, i.e. last date of the previous year. For the
purpose of computation of taxable net wealth, only few specified assets are
taken into account.
The actual collection from the levy of
wealth-tax during the financial year 2011-12 was Rs.788.67 crore and during the
financial year 2012-13 was Rs.844.12 crore only. The number of wealth-tax
assessee was around 1.15 lakh in 2011-12.
Although only a nominal amount of revenue is
collected from the levy of wealth-tax, this levy creates a significant amount
of compliance burden on the assessees as well as administrative burden on the
department. This is because the assessees
are required to value the assets as per the
provisions of Wealth-tax Rules for computation of net wealth and for certain
assets like jewellery, they are required to obtain valuation report from the
registered valuer. Further, the assets which are specified for levy of
wealth-tax, being unproductive, such as jewellery, luxury cars, etc. are
difficult to be tracked and this gives an opportunity to the assessees to under
report/under value the assets which are liable for wealth-tax. Due to this, the
collection of wealth-tax over the years has not shown any significant growth
and has only resulted into disproportionate compliance burden on the assessees
and administrative burden on the department.
It is, therefore, proposed to abolish the levy
of wealth tax under the Wealth-tax Act, 1957 with effect from the 1st April,
2016.
It is also proposed that the objective of
taxing high net worth persons shall be achieved by levying a surcharge on tax
payer earning higher income as levy of surcharge is easy to collect &
monitor and also does not result into any compliance burden on the assessee and
administrative burden on the department. The details regarding levy of enhanced
surcharge on this account are given under the heading “Rates of Income-tax”. It
is also proposed that information relating to assets which is currently
required to be furnished in the wealth-tax return shall be captured by suitably
modifying income-tax return.
This amendment will take effect from 1st April,
2016 and will, accordingly, apply in relation to the assessment year 2016-17
and subsequent assessment years.
