Wealth tax in India once played a key role in taxing high-net-worth individuals. Though abolished in 2015, its history and implications still spark curiosity. Could it return? How did it work? Let’s dive into the details for clarity.
What Was Wealth Tax in India?
Wealth tax in India was a levy on the net wealth of individuals, HUFs, and companies. Introduced in 1957, it targeted assets like property, jewelry, and cars, minus debts. Only wealth above ₹30 lakh was taxed at 1%, as per the Wealth Tax Act, 1957. For example, a ₹50 lakh mansion could trigger a ₹20,000 tax. It aimed to reduce wealth inequality but faced criticism for complexity.
Why Was It Abolished?
This tax in India ended in Budget 2015, replaced by a 2% surcharge on incomes above ₹1 crore. Collections were low—₹1,008 crore in 2013-14, per the Economic Times—against high administrative costs. Exemptions for productive assets like shares also diluted its impact. In addition, India’s tax revenue hit ₹19.58 lakh crore in 2023, per IBEF, showing other taxes took over. However, some speculate its return amid rising wealth gaps.
How It Worked and Who Paid:
This tax in India applied to resident individuals, HUFs, and firms with taxable assets on March 31 yearly. NRIs paid only on India-based assets. Valuation was tricky—market rates for property, gold rates for jewelry. Businesses often hired valuers to comply. Moreover, disputes clogged tribunals, adding to its unpopularity. In 2023, 6.77 crore ITRs were filed, per the Economic Times, reflecting a shift to simpler income tax systems.
Current Relevance:
Wealth tax in India no longer exists, but its lessons shape tax policy debates. Today, high earners face surcharges—10% for ₹50 lakh-₹1 crore incomes, up to 37% above ₹5 crore. Could wealth tax return? Experts doubt it, favoring income-based levies. Learn more at the Income Tax Department website.
Conclusion:
In conclusion, wealth tax in India aimed high but fell short. Understanding it helps navigate modern taxes like surcharges or capital gains. Ready to plan your finances? Explore more tax insights now!
– Ketaki Dandekar (Team Arthology)
Read more about Wealth Tax in India here – https://cleartax.in/wealth