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Definition: Wealth Tax
Wealth tax is a direct tax, charged on the net wealth of the entity. Also known as Capital tax, Equity tax, Net Worth tax. The net wealth may include owner-occupied residence, cash, bank deposits, real estate investments, jewels, motor vehicles, corporate stocks, financial securities, etc. Wealth tax is chargeable year after year on the same investments based on their market value, even if the investment does not generate any income.
Often confused with income tax, wealth tax is paid on the personal assets owned by the entity whereas income tax is paid on the income earned periodically. According to Indian Tax Laws, all individuals and Hindu Undivided Family (HUF) are required to pay Wealth Tax if their net wealth exceeds INR 30 lakhs. The tax payable is calculated as 1% of the amount exceeding INR 30 lakhs.
All resident Indians are liable to pay wealth tax on assets owned globally while the non-resident Indians and foreigners are liable only to pay wealth tax on assets owned in India. Wealth tax is also payable for an investor on the deemed assets owned by spouse.