How to save Wealth Tax

The Wealth Tax Act requires tax to be paid on the wealth held by an individual. Wealth is defined as unproductive assets, such as cash over Rs 50,000, land, motor cars, gold, silver, utensils or bullion and ornaments, luxury cars. Tax at the rate of 1% has to be paid on wealth over Rs 30 lakh, which is calculated according to the provisions of the Act, and a wealth tax return has to be filed. Individuals, Hindu Undivided 

Families and companies should file their wealth tax return in Form BA, which has to be signed by the assessee.

If you avoid tax legally, that is. Here are some ways you can do it. The easiest way is through property. To get maximum benefits, ensure that every adult family member purchases one immovable property in his/her own name.

Here's why

  
i. Let's say you are planning to buy a bungalow for Rs 50 lakh. Your wealth tax liability would be zero since, as per provisions in the Wealth Tax Act, 1957, one property is fully exempt from the purview of wealth tax.

So it would make sense to buy one property per adult in a family to reap the best of this provision. Though one self residential property is exempted , the second  house is liable to wealth tax .

Tips :-

If the second house is rented for minimum 300 days in a year , then wealth tax is not applicable.

The other option is each house property should be bought on each member of the family to come under the roof of 30 lakh limit and thus avoiding wealth tax.

ii. All commercial properties are fully exempt from the purview of wealth tax. So if you are holding commercial property -- let's say a shop, an office space or a factory building -- don't worry. You can own as many commercial properties as you like in your own name without having to worry about paying wealth tax.

iii. Investment in Jewellary is liable to wealth tax.

Tips:-

Instead of investment in jewellary which is liable to wealth tax, a person can invest in equity, debt instruments or commercial properties which are not liable to wealth tax.

Iv. Cash in Hand for individual/HUF exceeds Rs 50000 liable to wealth tax.

Tips:-
Excess of Rs 50000 may be given as a loan against consideration and thus can avoid wealth tax.