What’s The Distinction Between Property & Wealth Tax?
Both mobile and immovable asset classes are subject to taxes, which support government spending. It can be confusing to navigate India’s extensive tax system, particularly when attempting to discern between wealth tax and property tax. Despite their apparent similarity, the terms refer to different aspects of financial portfolios. Both mobile and immovable asset classes are subject to taxes, which support government spending. The purpose of this article is to explain the distinctions between wealth tax and property tax as well as their distinct functions within the Indian tax system.
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What exactly is property tax?
Property owners are subject to property tax, often called house tax, which is levied by municipal entities such panchayats, municipalities, and municipal corporations. The money raised by this tax is set aside for the upkeep of neighbourhood features including parks, roads, drainage systems, and other infrastructure. Property tax is not applicable to vacant land that has no linked real estate structure, and it applies to both residential & commercial properties, including land attachments & renovations.
What is the definition of a wealth tax?
The wealth tax is a direct tax impose on a person’s own possessions and is regulate by the Wealth Tax Act of 1957. With the adoption of the Union Budget in 2015, India stopped enforcing wealth tax, which was originally intended to create equity among taxpayers of different income levels. The change took effect for the 2015–16 fiscal year. Rather, it now seems as a tax on people who make more money. According to the Union Budget of 2019, the income tax surcharge was increased to 10% for individuals earning more than Rs 50 Lakh annually and to 15% for total income over Rs 1 Crore.
How is the property tax calculated in India?
Property tax is assesses based on the assesses value of the property and is determine by the local bodies. Property taxes are calculated using three main methods: The Unit Area Value System (UAS), the Rateable Value System (RVS) or Annual Rental Value System, and the Capital Value System (CVS). While UAS is the recommended technique in cities like Delhi, Kolkata, Patna, and Bangalore, RVS is used in places like Hyderabad & Chennai, and CVS is frequently used in Mumbai.
How is the Indian wealth tax calculated?
When an individual, business, or Hindu Undivided Family (HUF) has total net wealth that exceeds Rs 30 lakh on the valuation date, they are subject to wealth tax. When the value exceeds Rs 30 lakh, the appropriate tax rate is 1%. If a person’s net worth above this limit, they must file a report of net wealth, and the deadline for filing this return coincides with the income tax return.
Why was India’s wealth tax abolished?
A number of events led to India’s wealth tax being abolished in the 2015–16 Union Budget:
Administrative challenges: The wealth tax system required a lot of administrative work and was complicated. Accurate appraisal of various assets led to many disagreements and administrative difficulties.
Encouragement of investments: The wealth tax was repeal in order to reduce taxes for taxpayers and encourage investment. Removing this tax, according to policymakers, would promote economic expansion and make wealth generation easier.
Low revenue yield: Considering the amount of administrative work needed, the wealth tax’s revenue was very little. The tax’s financial advantages were outweigh by the costs of introduction and enforcement.
Key distinctions between property tax & wealth tax
| Criteria | Property tax | Wealth tax |
| Nature of tax | Tax on the ownership of real estate (land, buildings) | Tax on an individual’s total net wealth (assets – liabilities) |
| Abolition | Still in existence | Abolished in India from FY2015-16 |
| Assets taxed | Real estate assets | All taxable assets, including real estate, jewelry, cars, among others. |
| Calculation basis | Assessed value of the property | Net value of all taxable assets |
| Revenue focus | Local government revenue for public services | Central government revenue for reducing economic inequality |
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