gold under wealth tax
Post on 28-Mar-2015
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Wealth Tax
Wealth tax is a direct tax, which is charged on the net wealth of the
assessee. It is a tax on the benefits derived from ownership of
property. The tax is to be paid year after year on the same
property on its market value, whether or not such property
yields any income. Wealth tax, in India, is levied under Wealth-tax
Act, 1957.
The Income tax department under the Department of Revenue in the
Ministry of Finance administers the Wealth Tax Act, 1957 as well as
the Wealth Tax Rules framed there under.
Under the Act, the tax is charged in respect of the wealth held
during the assessment year by the following persons :-
Individual
Hindu Undivided Family(HUF)
Company
Chargeability to tax also depends upon the residential status of the
assessee same as the residential status for the purpose of the
Income Tax Act.
Wealth tax is not levied on productive assets, hence
investments in shares, debentures, UTI, mutual funds, etc are
exempt from it. The assets chargeable to wealth tax are :-
Guest house, residential house, commercial building
Motor car
Jewellery, bullion, utensils of gold, silver etc
Yachts, boats and aircrafts
Urban land
Cash in hand(in excess of 50,000), only for Individual & HUF
The following will not be included in Assets :-
Any of the above if held as Stock in trade.
A house held for business or profession.
Any property in nature of commercial complex.
A house let out for more than 300 days in a year.
Gold deposit bond.
A residential house allotted by a Company to an employee, or
an Officer, or a Whole Time Director ( Gross salary i.e.
excluding perquisites and before Standard Deduction of such
Employee, Officer, Director should be less than Rs. 5,00,000).
The Assets exempt from Wealth tax are :-
Property held under a trust.
Interest of the assessee in the coparcenary property of a HUF of
which he is a member.
Residential building of a former ruler.
Assets belonging to Indian repatriates.
One house or a part of house or a plot of land not exceeding
500sq.mts,for individual & HUF assessee.
Wealth tax is chargeable in respect of Net wealth corresponding to
Valuation date. (Net wealth means all assets less loans taken to
acquire those assets. Valuation date means 31st March of
immediately preceding the assessment year). In other words, the
value of the taxable assets on the valuation date is clubbed together
and is reduced by the amount of debt owed by the assessee. The net
wealth so arrived at is charged to tax at the specified rates. Wealth
tax is charged @ 1% of the amount by which the net wealth exceeds
Rs. 30 Lakhs.
With these brief write up on Wealth Tax we would like to
share discussion on having gold ornaments at home and
requirement of disclosers thereof to the income tax
department by way of filing of wealth tax returns.
Why Gold Ornaments / Silver Utensils / Diamond Ornaments
etc. Disclosure
It is advisable for an assessee to declare the nature and source of
non-taxable income or other receipts in the income tax and wealth
tax returns or in a statement enclosed with returns. When the entire
picture is place before the assessing officer there is little scope or
raid on the grounds of possessing undisclosed income.
In the case of a wealth tax assessee (ie.persons who is liable for
filing of wealth tax return) gold jewellery and ornaments found in
excess of the gross weight declared in the wealth tax returns only
need be seized.
In the case of a person not assessed to wealth tax (ie.persons who is
not liable for filing of wealth tax return), Gold jewellery and
ornaments
500 grams (42.867 Tola) per married lady
250 grams (21.433 Tola) per unmarried lady
100 grams (8.573 Tola) per male member of the family,
need not be seized.
(CBDT Instruction : No. 1916, dated 11/05/1994)
What happen if no disclosure of gold is made in wealth tax
return
Suppose Mrs.X is having gold ornaments of 60 Tola and she is liable
to file a wealth tax return.
(a) She has filed a wealth tax return showing gold ornaments of
25 Tola
(b) She has not filed wealth tax return
In the first category difference between 60 Tola & 25 Tola ie.35 Tola
and in the second category difference between 60 Toal & 50 Tola
ie.10 Tola be seized and if Mrs.X offers no explanation about the
nature and source of acquisition of the jewellery, or the
explanation offered by her is not, in the opinion of the Assessing
Officer, satisfactory , the value of jewellery may be deemed to be
the income of the assessee for such financial year.
Suppose the current market value of gold is Rs.20,000 & difference
in gold found 35 Tola then Rs.7,00,000 will be treated as income for
current financial year even though the purchase price of the gold
may be less than Rs.7,00,000. Tax will be levied @ 30% Rs.2,10,000
& Interest will be levied @ average rate which comes around 20% of
tax ie.Rs.42,000 plus penalty will be levied @ 100% to 300% of tax
ie.Rs.2,10,000 to 6,30,000 & Interest will come around Rs.42,000 to
Rs.1,26,000. Thus the tax and penalty will come more than the value
of gold.
Preserve important vouchers and other documentary evidence
for acquisition of assets
Where gold ornaments or jewellery have not been purchased by the
owner but have been acquired by way of gift on ceremonial occasion
or otherwise it is advisable that certificates carefully preserved.
It is necessary to declare the lockers in the income tax statements
and ensure that no unaccounted income, property or wealth is kept
in them. If all lockers are duly declared there is no risk of a raid.
If a person is not the owner of any bullion, jewellery, precious stones
or any other article or books of account in his possession but merely
a custodian of a friend or relatives property. In such cases it is
always better for the custodian to get a declaration from the owner
regarding the nature and source of the articles to satisfy himself
that they do not represent any undisclosed income or property.
Conclusion
Disclose all the gold, silver and diamond jewellery & utensils in
wealth tax return and avoid the harassment of department. For
further clarification feel free to contact CA Sheela Dedhia at
Hiren Sanghvi & Associates on 2438 4848 / 6662 5362 / 6661
8933.
For Excise Consultation Contact :
Guidelines for seizure of jewellery and ornaments in course of
search:
The CBDT has vide instruction No. 1916 dated 11th May, 1994,
issued guidelines for seizure of jewellery and ornaments in course of
search. The said guidelines, which is reported in (1994) 120 Taxation
(St.) 98, is reproduced below.
‘Instances of seizure of jewellery of small quantity in course of
operations under section 132 have come to the notice of the Board.
The question of a common approach to situations where search
parties come across items of jewellery, has been examined by the
Board and following guidelines are issued for strict compliance:–
In the case of a wealth-tax assessee, gold jewellery and ornaments
found in excess of the gross weight declared in the wealth-tax return
only need be seized.
In the case of a person not assessed to wealth-tax, gold jewellery
and ornaments to the extent of 500gms. per married lady,
250gms. per unmarried lady and 100 gms. per male member
of the family, need not be seized.
The authorised officer may, having regard to the status of the family
and the custom and practices of the community to which the family
belongs and other circumstances of the case, decide to exclude a
larger quantity of jewellery and ornaments from seizure. This should
be reported to the Director of Income-tax / Commissioner authorising
the search at the time of furnishing the search report.
In all cases, a detailed inventory of the jewellery and ornaments
found must be prepared to be used for assessment purposes.
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