In India, there is a certain tax, and it is collected through various criteria. Wealth tax is one among them, and it is imposed on the richer section of society. The intention of collecting this tax is to bring parity amongst the taxpayers through India. However, the wealth tax was abolished in the budget of August 2021, and it is considered as the cost incurred for recovering the taxes that benefit more.
Abolishing the wealth tax also simplified the entire tax structure. Being an alternative to the wealth tax, it was increased from 2 to 12 percent for the people in the category called super-rich. Any individual with an income of above Rs.1 crore and the companies with the income of Rs. 10 crores will be categories under the ambit of this super-rich segment, and they are imposed with this tax.
Most people get confused between income tax and wealth tax. However, there are some differences. Income tax is the tax payable on the income earned in the financial year. On the other hand, the wealth tax is the tax payable on the things that you have purchased with your money once you pay your income tax.
Easier and simple taxation system: By abolishing wealth tax, the government will be able to reduce the scope of some taxpayers, taking undue advantage of the loopholes in the wealth tax act. Expensive collection: The cost of collecting wealth tax was high than the benefits. Besides, the wealth tax does not make for the major portion of the collection of direct taxes in the country.
The details about the assets that the taxpayers submit in the income tax return will have some kinds of official correlate declared wealth. Thus, the tax officers will be able to ensure that there will not be any ‘leakages.
To compute the net wealth, all the taxpayers will have some value in their assets based on the wealth tax norms. For some of the assets like jewelry, the taxpayers should have a valuation report from any of the registered valuers. This will help in increasing the process of tax collection.
The government wants to bring more people under the net tax, and it is given for the individuals who file the income tax to outnumber those who file the wealth tax.
The wealth tax has been replaced with the levy of an additional surcharge for the people of India. The surcharge will be an application for individuals, cooperative societies, firms, and several local authorities who have an income that does not exceed Rs. 1 core. For the people with an annual income of more than Rs 1 crore and the companies with an income more than Rs. 10 crores will have the surcharges applicable, which is 15%.
Get to know about the wealth tax and ensure you are following the norms of the country to avoid legal issues.