Friday, March 23, 2012

Some More Bad News after Budget 2012 - Change to Wealth tax Rules in India

If you thought that the previous article on “Service Tax Increase” was bad news, then I am sorry to say that, you are mistaken my friend. This year, Wealth Tax is another area where the finance ministry has landed a solid right hand blow on the face of the Indian Citizen. Though the middle class Indian doesn’t have enough assets to qualify to pay Wealth Tax, even the higher income group, that pays a higher tax amount on their income and manages to accumulate wealth isn’t going to be happy with this new rules…

Do you remember the Article Are you an Innocent Tax Evader? In that, we had covered some basic mistakes we do as Tax Payers. We had covered Wealth Tax as one of those innocent mistakes. If you do not remember, please revisit the post to jog-up your memory.

Wealth Tax – To Revise:

All resident Indians are required to pay wealth tax and file a wealth tax return if their net wealth from assets exceeds Rs 30 lakh.

The Assets in this case include land, property, jewelry, cars, aircrafts, yachts and cash in excess of Rs 50,000. For Resident Indians (Resident Ordinary Residents - ROR), wealth tax is payable on all these assets, irrespective of whether they are located in India or abroad. For Non Resident Indians (NRIs), wealth tax is payable only on those assets that are located in India.

What is the New Change to this Law on Wealth Tax?

A new clause has been added to section 17 of the Wealth Tax Act. This section deals with 'wealth escaping assessment.' Under this section, if a taxpayer fails to disclose certain assets and pay wealth tax on those assets, the assessing officer has the right to open the taxpayer's returns for the last 4 years. In addition, if this net wealth that has escaped assessment is likely to be more than Rs 10 lakh, the assessing officer has the right to open returns for the last 6 years.

Also, now the new clause says that if the net wealth of the taxpayer that has escaped wealth tax includes any asset, including financial interest in any entity, located outside India, the assessing officer would have the right to go back and open tax returns of the last 16 years.

What is the Purpose of this New Ruling?

The intention of the new provisos is to bring to book all those tax evaders with significant assets in offshore locations or global tax havens.

Are you saying, Anand I am an NRI. I work in Gulf/USA/Singapore/Malaysia etc and so, this doesn’t affect me???

Unfortunately, as with any ruling by the Indian Finance Ministry, this is going to affect those NRIs too who are returning to India after a few years stay abroad.

Let us say, you worked in the USA for 4 years and are coming back to India. You bought some assets in the USA and still own them. While NRIs who have returned to India are exempt from taxes on their global assets for the first two years after they return (because their status is Resident but Not Ordinary Resident, RNOR, for those two years), they become Resident Ordinary Residents thereafter and must pay wealth tax on all assets including global assets.

So, essentially this becomes double taxation – Assets you purchased after paying all due taxes in the country of origin of your income, you are taxed on the same stuff after you return to India.

Now that is Sweet Right??? More Bad News makes life all the more better. Doesn’t it???

12 comments:

  1. sir,
    I am not sure what i have to ask, anyway plz tell me what are new rules made after new budget.
    I am asking this because authority is asking for more money in form of some sort of fees(Rs 1500)and few other expenses as well.

    ReplyDelete
  2. @ Raj

    New Rules reg. what? what authority is asking for fees and for what purpose? I did not understand the question bro

    ReplyDelete
    Replies
    1. Authority is the corrupt income tax officer. The fees is the Bribe, the "authroty" is asking. Dont you know these basic rules of corruption in India. Looks like you are not living in India....Cheers

      Delete
    2. Anonymous

      Everyone complains about things but doesn't do a thing to fix it. Nor do they stop giving bribe. But, complain.

      That is why India is still suffering

      Anand

      Delete
  3. This is regarding "cash in excess of Rs 50,000" If i have 50k+ in my salary account. why should i be taxed as i was already taxed and the money in the account is after the tax deduction. (50000 can be accumulated over a period of 5-6 months by any average citizen.)

    ReplyDelete
    Replies
    1. first of all - at least 70% of India's population may not be able to achieve this 50,000 in 5 to 6 months savings ratio. But nonetheless, I cannot comment on the why part because, the laws are made by our government and leaders.

      Delete
  4. Anonymous, the answer is you won't pay wealth tax on this income if it is in your bank account or am I missing something?

    ReplyDelete
    Replies
    1. Dear, you are absolutely correct, Salary account is nothing but it is a kind of bank account and the money is lies with said account, you have not to pay wealth tax on such amount.

      Delete
  5. If I sell jwellery worth 10-15 lakhs bought over a period of 8 years being an NRI do i need to pay any wealth tax...

    ReplyDelete
    Replies
    1. Yes, obviously because the value is high and you will retain the sale proceeds as either cash or convert it into some other asset.

      Anand

      Delete
  6. Sir I work in Nepal where I pay tax. If i will send some money 200000 to home is it taxable.
    Satyakam

    ReplyDelete
    Replies
    1. If amount is tax paid in Nepal then the 2 lakh is not taxable but if you put this in a bank acc or FD or invest somewhere, the income you earn from that money is taxable

      Delete

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