Wealth tax is levied on non-productive assets whose value exceeds Rs.1.5 million. Productive assets like shares, debentures, bank deposits and investments in mutual funds are exempt from wealth tax. However, the Government levies wealth tax on non-productive assets like residential houses, jewellery, bullion, motor cars, aircraft, urban land, etc. Foreign nationals are exempt from wealth tax on non-Indian assets.
Net wealth upto Rs.1.5 million is exempt from wealth tax and any amount in excess of this is taxed at a flat rate of 1 per cent. In arriving at the net taxable wealth, any debt incurred in acquiring specified assets is deductible.
Gift tax is levied on the donor at 30 per cent of the aggregate value of taxable gifts in a tax year. Gifts up to Rs.30,000 in a tax year are exempt from gift tax. However, gifts to dependent relatives at the time of marriage are exempt upto Rs.100,000. Foreign nationals are exempt from gift tax on non-Indian assets.
Centre for Monitoring Indian Economy, Bombay
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Last updated: May 1995.