The Finance Act 1992 made fundamental changes in the scheme of the levy of wealth tax in India from the Assessment Year 1993-94. Wealth tax is leviable on the net wealth tax of individuals, HUFS and companies only. All items of wealth tax are not liable to wealth tax now. Under the provisions of Section 3 wealth tax is chargeable at the flat rate of 1% of the amount by which the net wealth tax exceeds `.15 lakhs with effect from Assessment Year 1993-94. From the AX. 2010-2011 the wealth- tax exemption limit is increased from `.15 lakh to `.30 lakh. The expression “net wealth” refers to assets only. The expression “assets” according to a new clause (ea) of Section 2 (2) of the Wealth Tax Act .as amended by the Finance (No. 2) Act, 1998, with effect from the A.Y. 1999-2000 meant, broadly speaking, the following types of nonproductive assets on which wealth tax is leviable:
Any guest house and any residential building or land appurtenant thereto (other than any residential property let out for a minimum of 300 days), a farm house situated within `.25 kms from the local limits of any municipality. However, it does not include 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, with a gross annual salary tf less than `.25 lakh. Likewise, any house for residential or commercial purposes which forms part of the stock-in-trade is also not considered liable to wealth tax. Similarly, any house which the assessee may occupy for the purpose of any business or profession carried on by him is also exempt from wealth tax.
Motor cars (other than those used by the assessee in the business and running them on hire or as stock-in-trade)
Jewellery, furniture, utensils or any other article made fully or partially of gold, silver, platinum or any other precious metal or any alloy containing one or more of these precious metals.
Where, however, any of these items is used by the assessee as a stock-in-trade, it is not liable to wealth tax.
Yachts, boats, aircrafts (other than those used by the assessee for commercial purposes)
Cash in hand in excess of `.50,000 for individuals and NUFS and in the case of other persons any amount not recorded in the books of account.
Thus it is clear that other assets which are not covered under the above category are not liable to wealth tax in India. Thus some of the important items of wealth which were earlier either fully taxable or partially taxable to wealth tax are now completely exempt from the purview of wealth tax with effect from Assessment Year 1993-94:
(a) Bank fixed deposits
(b) Units of the UTI
(c) Units of Mutual Funds
(d) Government securities
(e) Loans and advances
(f) Shares and debentures
(g) Industrial assets, etc.
The expression “Urban land” means any land situated in any area comprised within the jurisdiction of the Municipality or a Cantonment Board which has a population of not less then `.10,000, as per the latest published figures or any land situated in any area within 8 km. from the local limits of any Municipality or Cantonment Board as is notified by the Central Government. However, urban land does not include land on which construction of a building is not permissible under any law for the time being in the area in which such land is situated or land occupied by any building which has been constructed with the approval of the appropriate authority or any ‘unused land held by the assessee for industrial purposes for a period of two years from the date of its acquisition by him or any land held by the assessee as stock-in-trade for a period of 10 years from the date of its acquisition.