Wealth Tax
Rules 1957
ü Wealth tax is a Direct Tax.
ü It is levied by Central
Government on few Persons.
ü Power to Levy Wealth Tax is
derived by Constitution of India.
ü It means Taxes on Wealth.
Wealth
Tax recognizes 5 types of wealth
1. Wealth from House XXX
2. Wealth from Motor Cars XXX
3. Wealth from Jewellery XXX
4. Wealth from Air/Water
Vehicles XXX
5. Wealth from Land XXX .
Total
Wealth YYYYYYYYYYY
In Wealth
Tax, Tax is always levied for 1 complete
Financial Year(1/April to 31/March). This Financial Year is known as PREVIOUS YEAR.
Year
next to Previous Year is known as ASSESSMENT
YEAR.
Person
on whom Wealth Tax is levied is known as an ASSESSEE.
Wealth Tax Chapter
Reason to levy wealth tax
To tax ------ Unproductive assets & bring about equality
in society.
Persons liable to pay Wealth Tax
Wealth Tax shall be charged for value of ASSETS on Valuation
Date to:
- Individual
- HUF
- Company
Persons not liable to pay Wealth Tax
Wealth Tax shall not be charged to:
- Company registered under section25 of companies Act 1956.
- Co-operative society
- Social Club
- Political Party
- Mutual Fund specified under section 10(23D) of Income Tax Act, 1961
Rate of Wealth Tax
Rate of Wealth Tax shall be 1% for wealth in excess of Rs.15
Lacs.
Valuation date
Means the last day of the previous year. i.e. 31st
march.
All
calculations of wealth shall be made at the midnight of 31st march.
Computation of Wealth Tax
Value of assets belonging to assessee = XXX
Less: Exemption of assets under
Section 5 = (XXX)
Gross Wealth = XXX
Less: Debts under Section 2(m) = (XXX)
Net Wealth = XXX
Less: 15 Lacs = (XXX)
Wealth Chargeable to Tax = XXX
Definition of
Assets
Section 2(ea)
Assets, means
(i).
House
Any building or land appurtenant thereto,
Whether used for
Þ
residential purposes or
Þ
commercial purposes or
Þ
for the purpose of maintaining a guest house or
Þ
otherwise
It includes a farm house situated within 25 kilometers from
local limits of any municipality or a Cantonment Board.
But does not include:
ü 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 whole-time employment,
having a gross annual salary of less than Rs. 5 Lacs. ;
ü Any
house for residential or commercial purposes which forms part of stock-in-trade ;
ü Any
house which the assessee may occupy for the purposes
of any business or profession carried on by him;
ü Any
residential property that has been let-out for a minimum period of 300 days in
the previous year;
ü Any
property in the nature of commercial establishments or complexes;
(ii).
Motor cars
But does not include:
ü Cars
used by the assessee in the business of running them on hire.
ü Cars
used by the assessee as stock-in-trade ;
(iii).
Jewellery
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 :
But does not include:
ü Jewellery
used by the assessee as stock-in-trade ;
(iv).
Air/ Water Transport Vehicles
Yachts, boats and aircrafts
But does not include:
ü Those
held as stock-in-trade
ü Those
used by the assessee for commercial purposes)
(v).
urban land ;
Means
land situated
(i) in
any area which is comprised within the jurisdiction of a municipality or a
cantonment board and which has a population of not less than 10000 according to
the last preceding census of which the relevant figures have been published
before the valuation date ; or
(ii) in
any area within such distance, not being more than 8 kilometers from the local
limits of any municipality or cantonment board referred to in sub-clause (i),
as the Central Government may, having regard to the extent of, and scope for, urbanization
of that area and other relevant considerations, specify in this behalf by
notification in the Official Gazette,
But does not include:
·
Land on which construction of building is not
permissible under any law for the time being in force in which such land is
situated.
·
Land occupied by any building which has been
constructed with the approval appropriate authority
·
Any unused land held by assessee for industrial
purposes for a period of 2 years from the date of its acquisition by him.
·
Any land held by assessee as Stock-in-trade for
a period of 10 Years from the date of its acquisition by him.
Example 1
Mr. A purchased a plot of land on 1.2.2004 for industrial
purposes. This land was not used by him.
Test whether this is taxable under wealth tax act 1957 on
31/march/2007.
Solution
1.2.2004 - 1.2.2005 - 1.2.2006
|
Valuation Date
|
Remarks
|
|
31.3.2003
|
Not an asset – As assessee did not have it
|
|
31.3.2004
|
Not an asset – As it was purchased for industrial
purposes.
|
|
31.3.2005
|
Not an asset – As it was purchased for industrial
purposes.
|
|
31.3.2006
|
It is an asset – As it 2 years passed and it was still
unused
|
|
31.3.2007
|
It is an asset – As it 2 years passed and it was still
unused
|
(vi).
Cash-in-hand
Means
In case of Individual and HUF - cash in
excess of Rs. 50000
In the case of other persons - any
amount not recorded in the books of account.
Example 2
X Ltd. is engaged in construction of residential flats:
a) Land
in urban area (construction is not permissible as per municipal laws in force)
Rs.35 Lacs
b) Motor-Cars
(used in business of running them on hire) Rs.700000
c) Jewellery
Rs. 1500000. Loan taken for purchasing this Rs. 1000000
d) Cash
balance (as recorded in books) Rs.225000
e) Bank
Balance Rs.350000
f) Guest
house Rs.600000
g) Residential
flats occupied by the Managing Director Rs. 1000000. The managing director is
on a whole time appointment and is drawing a salary of Rs. 3 Lacs per month.
h) Residential
house were let out on hire for 200 Days of Rs. 800000
Compute Taxable Wealth on 31st march.
Solution
I. Land
in urban area Not
an asset
II. Motor-Cars
Not
an asset
III. Jewellery 1500000
IV. Cash
balance Not
an asset
V. Bank
Balance Not
an asset
VI. Guest
house 600000
VII. Residential
flats 1000000
VIII.
Residential house (assume it not to be SIT ) 800000
Total 3900000
Less: Debt (1000000)
Net Wealth 2900000
Taxable wealth 1400000
Wealth Tax @1% 14000
Example 3
Mr. X an individual is engaged in construction of residential
flats:
a)
Land in urban area (construction is not permissible as
per municipal laws in force) Rs.35 Lacs
b)
Motor-Cars (used in business of running them on hire)
Rs.700000
c)
Jewellery Rs. 1500000. Loan taken for purchasing this
Rs. 1000000
d)
Cash balance (as recorded in books) Rs.225000
e)
Bank Balance Rs.350000
f)
Guest house Rs.600000
g)
Residential flats occupied by the manager Rs. 1000000.
The manager is on a whole time appointment and is drawing a salary of Rs. 3
Lacs per annum.
h)
Residential house were let out on hire for 200 Days of
Rs. 800000
Compute Taxable Wealth on 31st march.
Assume no exemption is considered by Mr.X
Solution
I. Land
in urban area Not
an asset
II. Motor-Cars
Not
an asset
III. Jewellery 1500000
IV. Cash
balance 175000
V. Bank
Balance Not
an asset
VI. Guest
house 600000
VII. Residential
flats 1000000
VIII.
Residential house (assume it not to be SIT ) 800000
Total 4075000
Less: Debt (1000000)
Net Wealth 3075000
Taxable wealth 1575000
Wealth Tax @1% 15750
Example 4
X Ltd. is engaged in business of retail Jewellery:
a). Land
(construction is not permissible as per municipal laws in force) Rs.45 Lacs
b). Motor-Cars
(used in business) Rs.700000, Loan taken for purchasing this Rs. 300000
c). Jewellery
Rs. 1500000.
d). Cash
balance (as not recorded in books) Rs.445000
e). Bank
Balance (as not recorded in books) Rs.350000
f). Residential
house were let out on hire for 350 Days of Rs. 800000
g). Yatch
held for personal uses Rs. 100 Lacs
Compute Taxable Wealth on 31st march.
Solution
a).
Land in urban area Not
an asset
b).
Motor-Cars 700000
c).
Jewellery (held as SIT) Not
an asset
d).
Cash balance 445000
e).
Bank Balance Not
an asset
f).
Residential house Not
an asset
g).
Yatch 10000000
Total 11145000
Less: Debt (300000)
Net Wealth 10845000
Exemptions
TRUST
Section 5(i)
Any property held under trust or
other legal obligation for any public purpose of a charitable or religious nature
in India
shall be exempt from tax.
Co-Parcerners
Exemption under section 5(ii)
Share of a co-parcerner in HUF
property is exempt, as tax on whole property is paid by Karta.
Ruler-Building
Exemption under section 5(iii)
Any building declared as official
residence of a ruler by Central government shall be exempt from tax.
Ruler-Jewellery
Exemption under section 5(iv)
Jewellery in possession of any
ruler, not being his personal property, which has been recognised as his
heirloom by central government shall be exempt from tax.
Recognition is granted by Central
government on following terms:
I.
Jewellery shall be permanently kept in India and shall not be removed outside India
except for a purpose and period approved by CBDT.
II. Reasonable
steps shall be taken for keeping the Jewellery substantially in original shape.
III. Reasonable
facilities shall be allowed to government officer (authorized by CBDT) to
examine the Jewellery as and when it deems fit.
Exemption under section 5(v)
ü Person
of Indian origin or Citizen of India who ordinarily residing in foreign country
and
ü who
leaving such country has returned to India
ü with
the intention of permanently residing in India ,
ü
THEN
ü Money
and assets brought by him into India and the value of assets acquired by him
out of such moneys within 1 year immediately preceding the date of his return and
at any time thereafter,
ü Shall be exempt from tax for a period of 7
successive years.
Exemption under section 5(vi)
Individual or HUF having one house or part of house or plot
of land upto 500 sq. meters shall be exempt from tax.
DEBTS
Section 2(m)
Debts owned by assessee on the
valuation date are deductible if these debts are incurred on the assets included in the wealth.
Example 5
Mr. Wasim Akram has gold of Rs. 10 lacs &Silver biscuits
of RS. 23 Lacs. & house of Rs. 50 Lacs.
Gold was purchased by him, by taking a loan of Rs. 2 Lacs.
Compute Taxable Wealth on 31st march.
Solution
Gold = 1000000
Silver Biscuits = 2300000
House = Exempt section 5(vi)
Gross Wealth = 3300000
Less Debts = (200000)
Net Wealth = 3100000
Example 6
Mr. Wasim Akram has gold of Rs. 20 Lacs &Silver biscuits
of RS.32 Lacs. & Plot of land (of 530 meters) for Rs. 150 Lacs. Shares of
RIL Rs. 300000
Gold was purchased by him, by taking a loan of Rs. 11 Lacs
on security of shares.
Compute Taxable Wealth on 31st march.
Solution
Gold = 2000000
Silver Biscuits = 3200000
Plot of land (of 530 meters) = 15000000
Shares = Not an asset
Gross Wealth = 20200000
Less Debts = (1100000)
Net Wealth = 19100000
Example 7
Mr. Wasim Akram has 2 houses of
|
|
Value
|
Loan taken on this house
|
|
House in Bombay- House I
|
2000000
|
1400000
|
|
House in Delhi- House II
|
5000000
|
4900000
|
Gold was purchased by him, by taking a loan of Rs. 11 Lacs
on security of shares.
Compute Taxable Wealth on 31st march.
Solution
Computation of wealth
Option 1 is better so we shall opt this.
Option 1
House I = Exempt
House II = 5000000
Gross Wealth = 5000000
Less Debts = (4900000)
Net Wealth = 100000
Option 2
House I = 2000000
House II = Exempt
Gross Wealth = 2000000
Less Debts = (1400000)
Net Wealth = 600000
VALUATION of ASSETS
I.
Valuation of immovable property
Schedule III
Step 1:
Determination of Gross Maintainable Rent
Actual Rent received/ receivable for the year = XXX
ADD:
1/9 of Actual Rent received/
receivable for the year- if repairs are borne by tenant = XXX
Taxes in respect of the property
agreed to be borne by tenant = XXX
15% of Interest on deposit received
from tenant – interest recovered = XXX
Lease premium or non-refundable
deposit received = XXX
No. of years of
lease
Any other obligation of owner met
by tenant = XXX
ANNUAL RENT = xxx
Gross Maintainable Rent shall be higher of:
ü Annual
rent
ü Annual
value assessed by Local Authority
Example 8
A house property is rented by owner for a rent of Rs. 20000
p.m for all 12 months.
Details are as follows:
1. Repairs
for Rs. 12000 were borne by tenant.
2. Municipal
Taxes are Rs. 120000, 50% of which are borne by tenant and rest by owner.
3. Tenant has given an advance of Rs. 10 Lacs
owner. Owner is paying an interest of 6% on deposit.
4. Tenant
has given him other benefits of Rs. 3000 monthly.
5. Tenant
has also given him a deposit of Rs. 500000, which is non-refundable. Lease term
is 5 Years.
Compute Gross Maintainable Rent on 31st march.
Solution
Annual Rent = 240000
Repairs = 26667
[240000/9]
Municipal taxes borne by tenant = 60000
Security deposit = 90000
[1000000 X (15-6)%]
other benefit = 36000
[3000 x 12 ]
Non-refundable deposit = 100000
[500000/5]
Annual rent = 552667
Example 9
A house property is rented by owner for a rent of Rs. 20000
p.m for 9 months till 31 December.
Details are as follows:
1. Repairs
for Rs. 12000 were borne by tenant./
2. Municipal
Taxes are Rs. 120000, 50% of which are borne by tenant and rest by owner.
3. Tenant has given an advance of Rs. 10 Lacs
owner. Owner is paying an interest of 6% on deposit.
4. Tenant
has given him other benefits of Rs. 3000 monthly.
5. Tenant
has also given him a deposit of Rs. 500000, which is non-refundable. Lease term
is 5 Years.
Compute Gross Maintainable Rent on 31st march.
Solution
All things shall be
computed for a year.
Actual Rent = 240000
Repairs = 26667
[240000/9]
Municipal taxes borne by tenant = 60000
Security deposit = 90000
[100000 X (15-6)%]
other benefit = 36000
[3000 x 12 ]
Non-refundable deposit = 100000
[500000/5]
Annual rent = 552667
Example 10
Compute GMR in above question if annual rent is Rs. 552667
& annual value assessed by local authority is Rs. 400000. Compute Gross
Maintainable Rent on 31st march.
Solution
GMR = 552667
Example 11
Compute GMR in above question if annual rent is Rs. 552667
& annual value assessed by local authority is Rs. 800000. Compute Gross
Maintainable Rent on 31st march.
Solution
GMR = 800000
Example 12
A house property is rented by owner for a rent of Rs. 240000
p.a.
Details are as follows:
1. Repairs
for Rs. 42000 were borne by tenant.
2. Municipal
Taxes are Rs. 120000, 30% of which are borne by tenant and rest by owner.
3. Tenant has given an advance of Rs. 10 Lacs
owner. Owner is paying an interest of 2% on such deposit.
4. Tenant
has given him other benefits of Rs. 48000 yearly.
5. Tenant
has also given him a deposit of Rs. 1200000, which is non-refundable. Lease
term is 3 Years.
If annual value assessed by local authority is Rs. 800000,
Compute Gross Maintainable Rent on 31st march.
Step 2:
Determination of Net Maintainable Rent
GMR = XXX
Less: 15% of GMR = (xxx)
Less: Municipal taxes on accrual basis (whether paid by
owner or tenant) = (xxx)
Net Maintainable Rent = XXX
Example 13
GMR = 360000
Municipal taxes = 30000
50% of municipal taxes are paid by tenant, rent are still
unpaid.
Compute Net Maintainable Rent on 31st march.
Solution
GMR = 360000
Less: 15% of GMR = (54000)
Less: Municipal taxes on accrual basis (whether paid by
owner or tenant) = (30000)
Net Maintainable Rent = 276000
Example 14
Annual Rent of property = 200000
Annual value as per local authority = 220000
Municipal taxes = 3000
50% of municipal taxes are paid by tenant, rent are still
unpaid.
Compute Net Maintainable Rent on 31st march.
Solution
GMR shall be higher of
Þ
200000
Þ
220000
GMR = 220000
Less: 15% of GMR = (33000)
Less: Municipal taxes on accrual basis (whether paid by
owner or tenant) = (3000)
Net Maintainable Rent = 184000
Example 15
A house property is rented by owner for a rent of Rs. 30000
p.m for 9 months till 31 December.
Details are as follows:
- Repairs for Rs. 12000 were borne by tenant.
- Municipal Taxes are Rs. 20000, 50% of which are borne by tenant and rest by owner.
Annual value assessed by local authority is Rs.500000
Compute Net Maintainable Rent on 31st march.
Solution
All things shall be computed for a year.
Rent = 360000
Repairs = 40000
[360000/9]
Municipal taxes borne by tenant = 10000
Annual rent = 410000
Annual value assessed by local authority is Rs.500000
GMR = 500000
Less: 15% of GMR = (75000)
Less: Municipal taxes on accrual basis (whether paid by
owner or tenant) = (20000)
Net Maintainable Rent = 405000
Step 3:
Determination Value as per Rule 3, 4 & 5 of Schedule III
Value as per Rule 3, 4 & 5 of Schedule III shall be
higher of following:
- NMR X Capitalisation factor (12.5/10/8)
- Cost of Construction + Cost of Improvement
Provided Value as per Rule 3, 4 & 5 of Schedule III
shall be NMR X Capitalisation factor (12.5/10/8), if all the following
conditions are fulfilled:
ü One
house
ü Exclusively
used by assessee for own residential purposes
ü House
at Delhi/Bombay/Calcutta/Madras --- Cost of Construction + Cost of Improvement
does not exceed 50 Lacs
ü House
at any other place --- Cost of
Construction + Cost of Improvement does not exceed 25 Lacs
Capitalisation factor (12.5/10/ 8)
|
Property
|
Capitalisation Factor
|
|
Property is constructed on
|
12.5
|
|
Property is constructed on
|
10
|
|
Property is constructed on
|
8
|
Example 16
Annual Rent of property = 200000
Annual value as per local authority = 220000
Municipal taxes = 3000
50% of municipal taxes are paid by tenant, rent are still
unpaid.
Property is built on a freehold land, for a total cost of
Rs.75 Lacs
Compute Value as per Rule 3, 4 & 5
Solution
GMR shall be higher of
Þ
200000
Þ
220000
GMR = 220000
Less: 15% of GMR = (33000)
Less: Municipal taxes on accrual basis (whether paid by owner
or tenant) = (3000)
Net Maintainable Rent = 184000
Value as per Rule 3, 4 & 5 of Schedule III shall be
higher of following: = 7500000
Þ
184000 X 12.5 = 2300000
Þ
7500000
Step 4: Adjustment
for un-built area as per Rule 6
Value as per Rule 3, 4 & 5 of Schedule III = XXX
Add: Adjustment for un-built area = XXX
Value after Rule 6 = xxx
Rule 6 shall be applicable only where::::: Un-built area > Specified area
|
Percentage of Default
|
Addition in value
|
|
Upto 5%
|
NIL
|
|
Above 5% Upto 10%
|
20% of value as per rule 3, 4 & 5
|
|
Above 10% Upto 15%
|
30% of value as per rule 3, 4 & 5
|
|
Above 15% Upto 20%
|
40% of value as per rule 3, 4 & 5
|
|
Above 20%
|
Value shall be FMV for property
|
Percentage of Default = Un-built area – Specified area x 100
Aggregate
area
Specified area in general terms mean permissible un-built
area.
Specified area is :
- Property is at Delhi/Bombay/Calcutta/Madras – 60% aggregate area.
- Property is at specified cities – 65% aggregate area.
- Property is at other cities – 70% aggregate area.
Step 5: Adjustment
for unearned increase in value of land as per Rule 7
Value as per Rule 3, 4, 5 & 6 = xxx
Less: Lower of following: = (xxx)
Þ
Amount of unearned increase to be claimed by
government
Þ
50% of Value as per Rule 3, 4, 5 & 6
Value for Immovable property = XXXX
‘Unearned increase’
means the difference between value of Land on valuation date as determined by
government and the amount of premium paid or payable to government for the
lease of land.
Example 17
Mr. X is an owner of commercial house built on a plot of
1000 sq. yards at Delhi .
The plot has been taken on a lease
from government. He has built up in 1975, 240sq. yards at a cost of Rs. 170000.
House has been let for commercial purposes to tenant @ 1000 p.m.
The tenant has agreed to bear cost
of all repairs and has given a refundable deposit of Rs.20000. Municipal taxes
levied are Rs.1080.
Municipal valuation by local
authority Rs.9000
DDA has notified Rs.300000 as
unearned increase out of which 40% is payable to government.
Unexpired period of lease is 79
Years.
Compute value of house property.
Solution
Actual Rent = 12000
Repairs = 1333
[12000/9]
Security deposit = 3000
[20000 X 15%]
Annual rent = 16333
Annual value assessed by local authority is Rs.9000
GMR = 16333
Less: 15% of GMR = (2450)
Less: Municipal taxes on accrual basis (whether paid by
owner or tenant) = (1080)
Net Maintainable Rent = 12803
Value as per Rule 3, 4 & 5 of Schedule III shall be higher
of following: = 170000
Þ
12803 X 10 = 128030
Þ
170000
Add: Adjustment of un-built are = 68000
[40% x 170000]
Workings
Unbuilt area= 1000-240 = 760
Percentage of Default =Un-built
area – Specified area x 100
Aggregate
area
= (760 - 60%1000) x 100 = 16%
1000
Total = 238000
Less: unearned increase = (119000)
Workings
Least of the following shall be deductible
Þ
40% x 300000 = 120000
Þ
50% x 238000 = 119000
Value of House = 119000
Example 18
Mr. X is an owner of commercial house built on a plot of
1000 sq. yards at Bombay .
The plot has been taken on a lease
from government. He has built up in 1999, 240sq. yards at a cost of Rs. 180000.
House has been let for commercial purposes to tenant @ 2000 p.m.
The tenant has agreed to bear cost
of all repairs and has given a refundable deposit of Rs.50000. Municipal taxes
levied are Rs.5000, 50% borne by tenant.
Municipal valuation by local
authority Rs.40000
DDA has notified Rs.300000 as
unearned increase out of which 30% is payable to government.
Unexpired period of lease is 29
Years.
Compute value of house property.
Solution
Actual Rent = 24000
Repairs = 2666
[24000/9]
Municipal taxes borne by tenant = 2500
Security deposit = 7500
[50000 X 15%]
Annual rent = 36666
Annual value assessed by local authority is Rs.40000
GMR = 40000
Less: 15% of GMR = (6000)
Less: Municipal taxes on accrual basis (whether paid by
owner or tenant) = (5000)
Net Maintainable Rent = 29000
Value as per Rule 3, 4 & 5 of Schedule III shall be
higher of following: = 180000
Þ
29000 X 8 = 232000
Þ
180000
Add: Adjustment of un-built are = 72000
[40% x 180000]
Workings
Unbuilt area= 1000-240 = 760
Percentage of Default =Un-built
area – Specified area x 100
Aggregate
area
= (760 - 60% x 1000) x 100 = 16%
1000
Total = 252000
Less: unearned increase = (90000)
Workings
Least of the following shall be deductible
Þ
30% x 300000 = 90000
Þ
50% x 252000 = 126000
Value of House = 162000
Example 19
Mr. X is an owner of commercial house built on a plot of 900
sq. yards at Bombay .
The plot has been taken on a lease
from government. He has built up in 1999, 250sq. yards at a cost of Rs. 200000.
House has been let for commercial purposes to tenant @ 4000 p.m.
The tenant has agreed to bear cost
of all repairs and has given a refundable deposit of Rs.150000. Municipal taxes
levied are Rs.15000, 40% borne by tenant.
Municipal valuation by local
authority Rs.40000
DDA has notified Rs.500000 as unearned
increase out of which 70% is payable to government.
Unexpired period of lease is 89
Years.
Compute value of house property.
Example 20
X is the owner of a house which is
constructed on leasehold land acquired from DDA. He has let out this house for
a rent of Rs.12000 p.m.
60% of municipal taxes shall be
paid by tenant
Cost of repairs shall be borne by
tenant
Rs. 100000 of advance shall be
given by tenant, this shall be refundable deposit.
Premium of Rs. 50000 shall be paid
for leasing the property for 5 years.
Annual value assessed by the local
authority is Rs.100000 and taxes levied shall be Rs.15000.
Percentage of default shall be
12.33%.
Cost of building (including land)
in 1980 was Rs. 10 Lacs
X paid Rs.80000 for acquisition of
land but now DDA’s value of land is RS. 4Lacs for the purposes of computing
unearned increase. 50% of which shall be paid to government.
Unexpired period of lease shall be
85 years.
Compute value of house property.
Solution
Actual Rent = 144000
Repairs = 16000
[144000/9]
Municipal taxes borne by tenant = 9000
Lease premium = 10000
[50000/5]
Security deposit = 15000
[100000 X 15%]
Annual rent = 194000
Annual value assessed by local authority is Rs.100000
GMR = 194000
Less: 15% of GMR = (29100)
Less: Municipal taxes on accrual basis (whether paid by
owner or tenant) = (15000)
Net Maintainable Rent = 149900
Value as per Rule 3, 4 & 5 of Schedule III shall be
higher of following: = 1499000
Þ
149900 X 10 = 1499000
Þ
1000000
Add: Adjustment of un-built are = 449700
[30% x 1499000]
Total = 1948700
Less: unearned increase = (160000)
Workings
Least of the following shall be deductible
Þ
50% x (400000-80000) = 160000
Þ
50% x 252000 = 974350
Value of House = 1788700
II. Valuation
of all other property
Schedule III
Shall be Fair market value of property
|
CHART for
illustrations
|
|
|
Commercial
flats lying vacant
|
Asset
|
|
Commercial
flats on rent to a Company
|
Asset
|
|
|
Not
an Asset
|
|
Commercial
building in which assessee has an office
|
Not
an Asset
|
|
Commercial
building held as Stock-in Trade
|
Not
an Asset
|
|
Residential
House given to employee of a company
|
Not
an Asset, if his salary is less than 5 lacs
|
|
Residential
House given to employee of a firm
|
Asset
|
|
Guest
house for use of company’s guests
|
Asset
|
|
Residential
house let out for 280 Days
|
Asset
|
|
Residential
house let out for 340 Days
|
Not
an Asset
|
|
Commercial
flat let out for 340 Days
|
Asset
|
|
Commercial
complex
|
Not
an Asset
|
|
|
|
|
Motor
cars used for transport of the employees
|
Asset
|
|
Motor
cars held for hire
|
Not
an Asset
|
|
Motor
cars held for vehicle dealer
|
Not
an Asset
|
|
|
|
|
Jewellery
held by Jeweler
|
Not
an Asset
|
|
Gold
held by a person
|
Asset
|
|
Silver
furniture held by a person
|
Asset
|
|
Loose
Diamonds
|
|
|
|
|
|
Aircraft
held by company for its employees
|
Asset
|
|
Helicopter
held by company for its employees
|
Asset
|
|
|
|
|
Cash
of Rs. 100000 held by an individual
|
Rs.50000
is asset
|
|
Cash
of Rs. 100000 held by an Company, unrecorded
|
Asset
|
|
Cash
of Rs. 100000 held by an Company, recorded in books
|
Not
an Asset
|
|
|
|
|
Land
held as stock-in-trade
|
Not
an Asset
|
THEORY
CONCEPTs
Deemed Assets
Section 4
In computing the net wealth of an individual, there shall be
included following assets, as belonging to that INDIVIDUAL, the value of assets
which on the valuation date are held –
1. By
the SPOUSE of such individual to whom such assets have been transferred by the
individual, directly or indirectly,
otherwise than for adequate consideration.
Provided assets transferred under agreement to live apart
this provision shall not apply.
2. By
a MINOR CHILD,
Exceptions
ü minor
child suffering from any disability of the nature specified in section 80U of
the Income-tax Act,
ü minor
married daughter, of such individual,
3. By
an AOP to whom such assets have been transferred by the individual directly or
indirectly, otherwise than for adequate consideration for benefit of the INDIVIDUAL,
his or her SPOUSE.
4. By
an AOP to whom such assets have been transferred by the individual under a REVOCABLE
transfer, (i.e. a transfer which is not for the life or under which transferor
has certain right. JHOOTA transfer)
5. By
the SON'S WIFE, of such individual, to whom such assets have been transferred
by the individual, directly or indirectly, otherwise than for adequate
consideration,
6. By
an AOP to whom such assets have been transferred by the individual, directly or
indirectly, otherwise than for adequate consideration for the benefit of SON'S
WIFE.
7. Where,
in the case of an individual being a member of a Hindu undivided family, any
property having been the separate property of the individual has, been
converted by the individual into property belonging to the family through the
act of impressing such separate property with the character of property
belonging to the family or throwing it into the common stock of the family,
directly or indirectly, to the family otherwise than for adequate consideration
then the converted property shall be deemed to be assets belonging to the
individual and not to the family;
8. Holder
of Impartible state (KARTA)
9.
Property
allotted to Members
Whenever property is
allotted or leased by a co-operative society, company or other association of
persons to its members under a house building scheme then such member shall be
Deemed Owner.
10. Possession transferred
If the purchaser has
paid the consideration to seller & has taken the possession as per Section
53A of the Transfer of Property Act, 1882, then Purchaser shall be the Deemed
owner
No comments:
Post a Comment