Wealth Tax is payable if the market value of particular assets exceeds Rs 30 lakh. The tax to be paid is 1% of the combined value of the assets exceeding Rs 30 lakh. Assets that qualify for Wealth Tax are:
- Second house that’s lying vacant for more than 66 days
- Gold and ornaments
- Art and artifacts
- Luxury cars, watches, yatches and aircrafts
- Over Rs 50,000 in cash
By not declaring the assets qualifying for Wealth Tax, the minimum penalty is 100% which can go up to 500%. The DTC punishes Wealth Tax evaders with imprisonment minimum of 3 months and can go up to 7 years.
Here are the common reasons where you must cross-check before handing over your income tax return (as published in ET Wealth on Feb 13, 2012):
- Ignoring income from investment in the name of spouse, kids.
- Ending life insurance policy before 3 years.
- Not including interest income in your tax return.
- Selling a house bought on loan within five years.
- Receiving gifts and cash from persons other than blood relatives.
- Not paying wealth tax on second house.
- Both spouses claiming tax benefit on same expenses.
- Withdrawing PF within five years of joining a company.
- Taking benefit of basic exemption limit twice in a year.