Wealth tax is levied on an individual at 1% of the amount by which his net wealth exceeds R30 lakh as on the valuation date. (for FY14, the valuation date is March 31, 2014.) Net wealth for the purpose of wealth tax is the value of taxable assets (net of exemption) in excess of the debt in relation to such assets. Assets for this purpose include buildings, cars, jewellery, urban land, cash in hand (in excess of R50,000), yachts, boats and aircraft. There is increased focus by the revenue authorities on wealth tax compliance, which has resulted in some significant amendments in disclosure requirements.
On June 23, 2014, the Central Board of Direct Taxes (CBDT) issued a notification increasing the disclosure requirements for individuals in respect of wealth tax returns for FY14 and subsequent years. This additional disclosure requirement was executed by the introduction of a new return form, i.e., Form BB,which replaced Form BA (used for filing wealth tax return till FY13 and earlier).
There have been significant additions to Form BB — a separate schedule has been added for providing details of assets whose value is not liable to wealth tax, such as agricultural land (removed from the list of wealth tax assets by Finance Act, 2013), bank account deposits, investment in bonds, shares, postal savings and so on. In addition, details of valuation of real estate, such as name and registration number of the registered valuer, along with the date of the valuation report, are to be disclosed as part of the details set out for immovable property. To enhance reporting of jewellery information, gross weight, net weight of the precious metal and details of the registered valuer are required to be expressly mentioned.
The citizenship of an individual, being a relevant criterion in determining the taxability of assets for wealth tax purposes (assets located outside India are not considered taxable for non-Indian citizens), has to be expressly set out.
The new form must be filed without any attachments. It has two parts — Part A, which requires an individual to provide personal details and residential status, and Part B, which has details of net wealth, tax, interest and detailed asset disclosures.
The CBDT has also made e-filing (with digital signature) of wealth tax return for FY14 and subsequent years mandatory for individuals who are liable to tax audit as per income tax laws. However, for individuals not liable to audit as per income tax laws, an exemption from e-filing of wealth tax return for fy14 has been granted and, accordingly, they could have filed their return (in Form BB) in paper format for this year. The migration to paperless filing is in sync with the e-filing requirement applicable to individuals for personal income tax returns.
Given the increased focus of revenue authorities on wealth tax compliance, it is imperative for individuals to assess and determine the applicability of wealth tax, especially in case of multiple investments in land and immovable property, which is still a very important source of saving for the burgeoning Indian middle class. A delay in the payment of wealth tax can lead to interest and possible penalties.
Surabhi Marwah
The writer is tax partner, EY.
Views expressed are personal
