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NRIs Wealth Tax

The Wealth Tax came into force on the 1st of April, 1957 and contains the provisions relating to taxation of wealth of individuals, who may be residents, non-residents and residents but not ordinarily resident in India.

Taxable assets under the Wealth Tax include
  • Residential house or commercial building or Guest house
  • Automobiles
  • Jewellery, bullion, utensils of gold, silver, or other precious metals;
  • Yachts, boats and aircraft;
  • Urban land located within specified limits; and
  • Cash in hand in excess of Rs.50, 000/-

Assets not subject to Wealth Tax

  • House allotted for residential purposes to a whole-time employee, officer or director of a company, whose gross annual salary is less than Rs.5, 00,000/-
  • House occupied for the purpose of business or profession;
  • One house or a part of house used for residential purpose;
  • Property held under a trust
  • Assets held as stock-in-trade in business;
  • Urban land on which construction is not permissible;
  • Co-parcenary interest in a Hindu Undivided Family (HUF);
  • Certain specified government bonds;
  • Resurgent India Bonds;
  • NRI Bank Account Deposits and FCNR Deposits; and
  • Assets belonging to Indian repatriate.

Deemed Assets
Assets as specified above and belonging to the non-resident are included in computing the net wealth. In some cases, certain assets which do not belong to the non-resident are included in his net wealth when they are held or are transferred with the intention to avoid wealth tax. These are referred to as deemed assets, which include:

  • Assets transferred by one spouse to another;
  • Assets held by a minor
  • Assets transferred to a person or an association of persons;
  • Assets transferred under revocable transfers;
  • Assets transferred to close relatives;
  • Interest of a partner in a partnership firm;
  • Self-acquired property converted into joint family property;
  • Gifts made by mere book entries; and other assets which would otherwise belong to the non-resident.

Net Wealth
Wealth tax is payable on the net wealth of a non-resident as on a particular date called the valuation date. Net wealth as on the valuation date is assessable to tax in the succeeding year referred to as the assessment year. Under Indian tax laws, valuation date is 31st March of every year and the corresponding assessment year in relation to the valuation date is 1st April of that year to 31st March of the succeeding year.

Computation of Wealth tax
Net wealth of non-residents is computed by taking into account all the assets held by the individual in India including deemed assets and deducting any liabilities or debts that exist. Wealth tax is payable at the rate of 1% on the net wealth computed as above and exceeding Rs.15,00,000/- as on the valuation date.

Tax Return
Non-residents who are liable to pay wealth tax where their net wealth exceeds Rs.15,00,000/-, are required to file a wealth-tax return in Form 2A. The return should be filed on or before 31st July.

Special Case
A returning non-resident Indian or a person of Indian origin (PIO), who wishes to settle permanently in India, is eligible for exemption from wealth tax in respect of certain assets.

  • Moneys brought by him into India;
  • Value of assets brought by him into India,
  • Moneys standing to his credit in a NRE Account with a bank in India as on the date of his return to India; and
  • Value of assets acquired by him out of moneys specified in (1) and (2) above within one year prior to the date of his return and at any time thereafter.

Under Section 5(1) (v) the exemption for NRIs is available for a period of seven successive assessment years after his return.

Wealth-tax Implications
Wealth tax, in India, is levied under the Wealth-tax Act, 1957. NRIs are liable to pay tax for their wealth in India alone. Foreign wealth is entirely exempt from tax.

Wealth tax is payable on the aggregate value of chargeable assets as reduced by the value of debts owed on valuation date. The valuation date is uniformly fixed at 31st March.

Tax Exemptions on Wealth tax for NRIs
An NRI or PIO returning permanently to India, the assets brought back by him, and the income from such assets earned within a year of his return are exempt from wealth tax for a period of 7 years.

Wealth tax is levied on non-productive assets like urban land, buildings (except one house property), jewellery, bullion and vehicles, cash over Rs. 50,000, and more. The wealth tax is 1% currently on the aggregate value of the assets as on 31st March every year in excess of Rs. 1.5 million

NRIs are liable to pay wealth tax if the market value of taxable assets as on 31st March exceeds Rs. 1.5 million.

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