When to file your wealth tax return

Sashant was relieved that the due date for filing the income tax return had been extended by one month to August 31, 2012.

He happily trotted off to meet his friend Kavitha, a chartered accountant, who would guide him on the filing.

Kavitha made a list of documents required from Sashant and while conversing with him realised that in the FY 2011-12, he had bought two house properties – one in India and one in England (value Rs 75 lakh) which were lying unoccupied for the entire financial year.

He had also purchased gold ornaments (costing over Rs 10 lakh) for his fiancé for their upcoming wedding in November 2012.

Sashant intimated that he had incurred debts (of about Rs 20 lakh) for acquiring the two house properties. He qualified as a resident and ordinarily resident of India under the Income Tax Act for FY 2011-12.

Global assets

Considering the above set of facts, his net global assets were liable for wealth tax and accordingly, it was imperative for him to file a wealth tax return along with filing of the income tax return as both the due dates coincided (August 31).

He had never filed a wealth tax return before.

Kavitha explained to him, that in case the net wealth of an individual on the valuation date exceeded Rs 30 lakh, then wealth tax at 1 per cent of the amount by which the net wealth exceeded Rs 30 lakh would have to be paid.

The net wealth is arrived at by reducing from the gross wealth the debts incurred in relation to acquiring the wealth. The valuation date for FY 2011-12 was March 31, 2012.

In case of Sashant, the net wealth on March 31, 2012 included the house property lying vacant and gold jewellery. Accordingly wealth tax would have to be paid.

Filing process

He asked how to file wealth tax return. Kavitha mentioned that it would have to be filed in Form BA with the wealth tax officer.

Further, the income-tax authorities specified under the Income-Tax Act shall be the wealth-tax authorities too.

Where the return of net wealth for any assessment year is furnished after the due date, or is not furnished, Sashant would be liable to pay interest.

He mentioned that he was fine in disclosing his Indian assets (gold jewellery and one residential house) but according to him there was no reason to disclose his assets outside India.

Kavitha said that a recent amendment in section 17 (w.e.f July 1, 2012) of the Wealth Tax Act mentions that if any person is found to have any asset or financial interest in any entity located outside India, it will be deemed to be a case where net wealth chargeable to tax has escaped assessment and the wealth tax assessment can be re-opened within 16 years.

In case the wealth tax authorities, buoyed by this amendment, decide to pick up Sashant’s case for scrutiny and probe further, they could be in a strong position to re-open his wealth tax assessment and that would spell doomsday for him, as the asset in England would be deemed to be wealth escaping assessment and penalties would be levied on him.

Kavitha was done with her explanations and Sashant was ready to file his wealth tax return for the FY 2011-12.

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