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"Substantial Saving Of Wealth Tax On Real Estate"

 

By proper planning of investment in the real estate it is possible for every assessee to save a substantial amount of wealth tax. In case a person is owner of more than one residential house property and both the properties are kept for own residential use, the second house property would be subjected to wealth tax.

 

Even if the person has more than one residential house property but the subsequent residential house property is given on rent, then such residential property would not be subjected to wealth tax provided it is given on rent for more than 300 days in a year.

 

Taking advantage of this provision one should make investment in the real estate so as to avoid the problem of wealth tax liability in respect of occupied house property and also let-out residential house property.

When we talk of commercial property the problem of wealth tax does not arise. This is because of the fact that all commercial properties are fully exempt from wealth tax without any upper limit. The purpose and use of the commercial properties is irrelevant in deciding the wealth tax exemption. Thus, all commercial properties when are used for self-occupation or given on rent or just vacant will be fully exempted from the purview of wealth tax.

 

Thus by proper planning of the affairs and of the investment pattern in real estate it is possible to save substantial amount of wealth tax by claiming full exemption in respect of various properties owned by you. However, from the point of view of wealth tax planning the best result oriented tax planning would be to buy one residential house property in the name of each family member. For example, if there is a family of 3 brothers and their wives. It is better to buy one residential property in the name of all the three brothers. Similarly, to buy separate residential properties in the names of three wives of the three brothers would be good tax planning. Thus, if in this family comprising of three brothers and their wives, i.e. total six properties for residential house are purchased in years to come, then there will be no liability of payment of wealth tax. However, instead of buying one property in the name of each family member if they would have purchased six different properties with fixed share of each family member in all the six properties, then unfortunate part would have been that excluding one property all other properties would be subjected to payment of wealth tax because under the Wealth Tax Law one property, whether residential or commercial, is completely exempt from the purview of wealth tax. Hence, from the point of view of tax planning it is recommended that the property to be purchased in the name of each family member is of high value so that one big property for each family member can become wealth tax free. In case you are holding any property outside India, then do make it a point to declare the same in your wealth-tax return
 
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