Attention! all you conscientious taxpayers who want to honestly pay your taxes and get a good night’s sleep. Did you know that your duty as a taxpayer does not end with paying income tax? While income tax is what you pay on the taxable income you have earned during the year, you may also be liable to pay an additional tax on the wealth you have accumulated over the years. Called wealth tax, here are some quick facts on it.

What is Wealth Tax? It is a direct tax governed by the Wealth Tax Act, 1957 and imposed on the basis of ownership of certain assets, payable even though the assets may not earn an income. Like income tax, it is an annual tax.

When am I liable for wealth tax? An individual is liable for wealth tax only if his net taxable wealth, that is, the aggregate value of all taxable assets (subject to available exemptions) on the valuation date (March 31) minus the aggregate value of all debts owed in relation to such taxable assets, exceeds Rs 30 lakh.

What is the scope of taxable wealth? The scope of taxable wealth depends on the residential status (according to the Income-Tax Act) and nationality of the taxpayer. If the taxpayer is a citizen and an ordinary resident of India then all taxable assets in and outside India are taxable (subject to available exemptions). However, if the taxpayer is a citizen of India who is non-resident or not ordinarily resident in India or a citizen of another country (whether he is resident in India or not) then the net wealth would comprise only his Indian taxable assets (subject to available exemptions).

Which assets are considered taxable? The following assets owned by an individual are subject to wealth tax:

Guesthouse, farmhouse, residential house;

Motorcar;

Jewellery, bullion, furniture, utensils and articles made of precious metal;

Aircraft, yachts and boats;

Urban land;

Cash in hand exceeding Rs 50,000.

Exemption is available for certain assets subject to specified conditions. For example, certain assets used as stock-in-trade of a business, residential property which has been let out for at least 300 days, one house, part of a house or a plot of land belonging to an individual are exempt from wealth tax.

Apart from assets owned by you, assets held by your minor children or assets transferred by you to your spouse for inadequate consideration are also deemed to be your assets.

What is the rate? Wealth tax is payable at 1 per cent of the aggregate value of taxable assets owned by you exceeding Rs 30 lakh in value, as on March 31 of the year.

When and how should the tax be paid? Wealth tax should be paid as self-assessment tax using the prescribed challan (ITNS 282) before filing your return of wealth.

Should I file a wealth tax return? A return of wealth should be filed by an individual taxpayer in the prescribed form (Form BA) by July 31 following the valuation date, if the net taxable wealth exceeds Rs 30 lakh. There is currently no facility for filing wealth tax return electronically. Hence, it should be filed in paper form at the office of your jurisdictional tax officer.

Is wealth tax return scrutinised? The tax officer has the authority to scrutinise the return filed by you. He/she can serve a notice for scrutiny anytime within one year from the end of the month in which the return was filed.

Can I file an earlier year’s return now? If you have not filed your wealth tax return for a particular assessment year, you can file a belated return within two years from the relevant valuation date. Hence, you can still file your wealth tax return for March 31, 2011 and 2012.

What are the consequences of late filing, or not filing wealth tax return? Interest for late filing is payable at 1 per cent per month of the tax due.

If you are liable to pay and file a wealth tax return and fail to do so, the tax officer may initiate proceedings for recovery of wealth tax and interest due. In addition, he/she may also levy a penalty that can range anywhere between the wealth tax due and five times the amount.

Mousami Nagarsenkar is Manager and Bhavin Rajput is Deputy Manager, Deloitte Haskins and Sells

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