How Wealth Tax is Calculated?

Wealth tax is calculated at the rate of 1 percent over and above the limit of 30 lakh. Whereas Income Tax is a tax on the income earned in a particular year and wealth tax is a tax on the value of assets held in a particular year.

This legally and logically means that if you sell a property before the 31st of March of a financial year, then you would not have to include that asset while calculating wealth tax. But the gains from the sale would be included in income tax.

How are Assets Valued?

There are different methods of valuation for each asset. In the case of property, a multiplier factor is applied to the net rent. In the case of jewellery, value of jewellery shall be estimated to as per the current market rate of the metal. If the asset value exceeds 5 lakh, then a report of a registered person must be attached. For rest of the assets, the Assessing Officer may conduct the valuation himself or refer the valuation to a Valuation Officer, which ever is suitable.

All this makes valuation a complex and wearisome process and it is best to consult a financial professional before going through the process."Your chartered accountant should be able to help you with these details," says Sandeep Shanbhag, Director of Wonderland Investments and an expert in NRI tax and finances.