Wealth-tax and residential status
A person may own assets in India as well as abroad. The taxability of an asset will be
determined on the basis of the residential status and the location of the asset. Residential
status will be ascertained in the same manner as is determined under Income-tax Law.
Following persons are liable to pay wealth-tax in respect of their world assets (i.e., on the
assets located in India as well as on the assets located outside India):
(a) A resident and ordinarily resident individual, who is an Indian citizen.
(b) A resident and ordinarily resident HUF.
(c) A resident company.
Following persons are liable to pay wealth-tax only in respect of assets located in India.
In other words, following persons are not liable to pay wealth tax in respect of assets
owned by them and which are located outside India:
(a) An individual who is not a citizen of India (whether resident and ordinarily
resident or not).
(b) A resident but not ordinarily resident individual and a resident but not ordinarily
resident Hindu Undivided Family.
(c) A non-resident (may be individual or HUF or company).
Assets covered under wealth-tax
Wealth tax is levied on the value of assets. The term “assets” is defined under Section
2(ea) of the Wealth-tax Act. Hence, wealth tax is levied only on those properties which
are covered in the definition of the term “assets” as defined in the Wealth-tax Act.
Following items are covered in the definition of the term “assets”.
Any building or land appurtenant thereto, whether used for residential or
commercial purposes or for the purpose of maintaining a guest house or
otherwise. It will also include a farm house situated within 25 kilometers from
local limits of any municipality or a Cantonment Board. However, following
buildings or land appurtenant thereto are not included in this category :
o A house meant exclusively for residential purposes and which is allotted
by a company to an employee or an officer or a director who is in wholetime
employment, having a gross annual salary of less than Rs. 10,00,000.
o Any house (may be residential house or used for commercial purposes)
which forms part of stock-in-trade of the taxpayer.
o Any house occupied by the taxpayer for the purposes of any business or
profession carried on by him.
o Any residential property which has been let-out for a minimum period of
300 days in the previous year.
o Any property in the nature of commercial establishments or complexes.
 Motor cars (other than those used by the taxpayer in the business of running them
on hire or held as stock-in-trade).
 Jewellery, bullion, furniture, utensils or any other article made wholly or partly of
gold, silver, platinum or any other precious metal or any alloy containing one or
more of such precious metals. However, this category does not include any of the
above items held as stock-in-trade by the taxpayer.
 Yachts, boats and aircrafts (other than those used by the taxpayer for commercial
purposes).
 Urban land (*), other than following :
o Land on which construction of a building is not permissible under any law
for the time being in force; or
o Any land on which construction is done with the approval of the
appropriate authority; or
o Any unused land held by the taxpayer for industrial purposes for a period
of two years from the date of its acquisition by him; or
o Any land held by the taxpayer as stock-in-trade for a period of ten years
from the date of its acquisition by him.
o Land classified as agricultural land in the records of the Government and
which is used for agricultural purpose.