I-T redefining wealth, taxing times ahead
If you bought a watch worth more than Rs 50,000, an expensive painting or inherited jewellery but didn't mention it in your I-T returns, think again. Finance minister Pranab Mukherjee is likely to announce a wealth tax on these items in Budget 2012. Gaurav Choudhury reports. Taxman's watchingindia Updated: Mar 09, 2012 13:42 IST
If you bought a watch worth more than Rs 50,000, an expensive painting or sculpture or inherited jewellery but didn't mention it in your income tax returns, think again. Finance minister Pranab Mukherjee is likely to announce a wealth tax on these items in Budget 2012.
The tax will be on the lines of what the Direct Taxes Code (DTC) Bill, introduced in Parliament in 2010, has proposed on specified unproductive assets of all taxpayers, except for non-profit organisations.
The scope of "assets" to be included in "net wealth" will be widened to include archaeological collections, bank deposits outside India and cash in hand of more than Rs 2 lakh.A senior official, who refused to be identified, said if the combined value of these items (see box) exceeds Rs 1 crore on March 31 of every year, you will have to pay wealth tax at the rate of 1% of the excess amount. This raises the limit from Rs 30 lakh but widens the scope of assets included.
"The tax department will carry out random surveys by enquiries on architects, interior decorators, imported watch dealers and art galleries to collect information on spending on such items," the official said.
Wealth tax is a measure to prevent tax evasion and ensure that taxpayers report their assets accurately.
Experts, however, cautioned that improper implementation of wealth tax measures could be counter-productive and may even encourage tax evasion.
"The DTC Bill doesn't specify how the authorities will determine that a person possesses some of these assets," said Divya Baweja, senior director, Deloitte Touche Tohmatsu India.
The government official too said collecting information on possession of assets has always been a challenge for implementation of wealth tax.
"It is not clear whether these data will be gathered from the points of purchase or assessees' statement of accounts. One of the major constraints was the absence of information about spending where cash was the dominant mode of payment," the official said. That should get fixed in Budget 2012.