Wealth of Over Rs 1 Crore 1% Tax on Net wealth
Wednesday, September 8, 2010
Wealth of Over Rs 1 Crore 1% Tax on Net wealth
The proposed Direct Taxes Code, which is expected to replace the existing Income Tax Act in 2012, has proposed to impose 1% tax on net wealth in excess of Rs 1 crore. The rate may seem harmless, but the trouble is that it has included archaeological collections, drawings, paintings, sculptures, wristwatches worth over Rs 50,000, besides cash in hand above Rs 2 lakh among other things into the list that forms wealth. In short, the high net-worth individual ( HNI) is in for some taxing times.
Under the existing law, the threshold level to kick in the wealth tax provisions is Rs 30 lakh. However,
in the existing provision, items like watches, paintings and sculptures and deposits with foreign banks are not included.
According to HNIs and the experts who manage their money, these seemingly innocent additions to the list in the new tax co de bill are likely to make life difficult for them. There would be disputes over the valuations of these pieces with the IT department as there is no uniform method to value them. This could almost result in a throwback to an era when an encounter with the I-T officials used to give people sweaty palms. Sadly, it may also have an adverse impact on individuals' appetite for collecting artworks and artefacts, a trend slowly emerging in the country, with unintended victims being budding artists and tribal artisans.
A small solace is that the first house is exempt from the wealth tax net. Considering the runaway price in real estate, it would have otherwise cast every owner of a modest 2-BHK in the suburbs into the tax net.
The DTC provision is particularly harsh on foreign citizens, including the person of Indian origin, says Singh. If you have worked abroad, created some assets there and moving back to India, you will have to pay wealth tax on your foreign assets if you have taken Indian resident status. In such a situation, you will have to pay 1% tax on your deposits in foreign banks and on the value of other assets in foreign countries.
The proposed Direct Taxes Code, which is expected to replace the existing Income Tax Act in 2012, has proposed to impose 1% tax on net wealth in excess of Rs 1 crore. The rate may seem harmless, but the trouble is that it has included archaeological collections, drawings, paintings, sculptures, wristwatches worth over Rs 50,000, besides cash in hand above Rs 2 lakh among other things into the list that forms wealth. In short, the high net-worth individual ( HNI) is in for some taxing times.
Under the existing law, the threshold level to kick in the wealth tax provisions is Rs 30 lakh. However,
in the existing provision, items like watches, paintings and sculptures and deposits with foreign banks are not included.
According to HNIs and the experts who manage their money, these seemingly innocent additions to the list in the new tax co de bill are likely to make life difficult for them. There would be disputes over the valuations of these pieces with the IT department as there is no uniform method to value them. This could almost result in a throwback to an era when an encounter with the I-T officials used to give people sweaty palms. Sadly, it may also have an adverse impact on individuals' appetite for collecting artworks and artefacts, a trend slowly emerging in the country, with unintended victims being budding artists and tribal artisans.
A small solace is that the first house is exempt from the wealth tax net. Considering the runaway price in real estate, it would have otherwise cast every owner of a modest 2-BHK in the suburbs into the tax net.
The DTC provision is particularly harsh on foreign citizens, including the person of Indian origin, says Singh. If you have worked abroad, created some assets there and moving back to India, you will have to pay wealth tax on your foreign assets if you have taken Indian resident status. In such a situation, you will have to pay 1% tax on your deposits in foreign banks and on the value of other assets in foreign countries.
0 comments:
Post a Comment