If you buy a costly watch, purchase an expensive painting, acquire a rare sculpture, or inherit jewellery from your ancestors, you may soon have to mention these in your tax returns.
In the budget for 2014-15, the government may widen the scope of “assets” to be included in “net wealth” to cover watches that cost more than a certain threshold value, archaeological collections, drawings, paintings, sculptures or any other work of art, bank deposits outside India, cash in hand of more than Rs. 2 lakh, etc.
An additional tax of 10% is also proposed if annual earnings from dividends on mutual funds and equities exceed Rs. 1 crore.
Besides, the government is also examining a proposal to change rules for levies on income from property, which could make letting out houses for commercial purposes more taxing.
The objective is to capture all assets for wealth tax, whether physical or financial, to end discrimination against those citizens who are conservative and put their money in physical assets.
“One of the major constraints was the absence of information about spending where cash was the dominant mode of payment,” a source said.
A wealth tax at the rate of 0.5% if the total value of such assets is between Rs. 5 crore- Rs. 20 crore, and 1% if it is higher than Rs. 20 crore — up from the existing limit of Rs. 30 lakh at the rate of 1% — is being examined.
Wealth tax is an anti-abuse measure and is aimed to ensure reporting of significant assets held by a taxpayer.
Experts, however, cautioned that improper implementation of wealth tax measures carry a high risk of encouraging people to evade taxes.