Your Taxes

I have a ULIP purchased in March 2008. The annual premium is ₹40,000 and the sum assured is ₹2,00,000. I have paid the premiums regularly for seven years. Recently, I made a partial withdrawal of ₹3,00,000 from the ULIP. I have taken 80C benefit of the premium. Please let me know the tax implication on such partial withdrawal.

Sumantha Nayak

In the case of policies taken before April 2012, any sum received on maturity under a Unit-Linked Insurance Policy (ULIP) is exempt from tax under Section 10 (10D) of the Income Tax Act, 1961, provided the annual premium paid does not exceed 20 per cent of the sum assured or the sum assured is at least five times the premium paid. Further, the premium must have been paid for at least five year prior to withdrawal.

I understand that you have made a partial withdrawal from the ULIP bought in March 2008 after contributing to the ULIP for seven years and also, the premiums paid did not exceed 20 per cent of the sum assured. Therefore, the amount withdrawn partially from the ULIP would be exempt from tax.

I would like to know about wealth tax — the amount of wealth that is taxable, the rate of tax and assets to be included for calculation of wealth.

K Ramachandran

Wealth tax, as the name suggests, is a levy on the wealth of a person and is governed by the Wealth Tax Act, 1957. The statute is applicable to every individual, Hindu Undivided Family and company whose net wealth exceeds ₹30 lakh as on March 31 of a tax year.

The rate of tax is one per cent on the amount exceeding this threshold limit. No surcharge or education cess is applicable, unlike in the case of income tax.

Net wealth would mean the market value of all chargeable assets held on the valuation date as reduced by the value of debt incurred in relation to these assets. However, assets located outside India will not form part of the net wealth in case of foreign nationals. The Wealth Tax Act, 1957, also lays down the valuation rules (Schedule III) for arriving at the taxable value of specified assets.

The following is the list of assets that are chargeable to wealth tax — land and buildings situated within 25 sq km of the local limits of a municipality, cars, jewellery, bullion, furniture, utensils of gold and silver, yachts, boats and aircraft, urban land and cash in hand in excess of ₹50,000.

However, please note that there are conditions/exclusions to the above and these have to be factored in before determining whether an asset would be subjected to wealth tax.

The writer is Partner, Deloitte, Haskins & Sells LLP. Send your queries to taxtalk@thehindu.co.in