In a recent development, the compliance norms for wealth tax purposes in India have been amplified. Accordingly, overseas assets of persons subject to Indian wealth tax, including:
- bank accounts;
- immovable properties, including debt owed in relation thereto;
- jewellery; and
- shares, bonds and debentures,
will be required to be mandatorily disclosed in the wealth tax returns. It is important to note that wealth tax is a separate levy from income tax in India and is charged at the rate of 1 percent of the net wealth beyond £30,000 (INR 30 lakhs) in every assessment year. Further, net wealth is separate from the concept of current income, and it is possible that tax paid income channelized into other assets like immovable property, etc. becomes subsequently liable to a levy of wealth tax.
The Indian Income Tax Department is currently engaged in mapping income tax returns against wealth tax returns to ensure consistency of disclosure of assets. The penalties for non-compliance of wealth tax norms range from an unlimited monetary penalty to seven years' imprisonment, or both. Given the current investigations into overseas "black money," a number of international financial intermediaries like banks, trust companies and others, have been brought under the investigative machinery to obtain information under the risk of being proceeded against as wilful abettors.
It is vital to make an early assessment of the nationality and residence status of individuals who have assets in India and outside of it in excess of the above threshold. This could pave the way for a cohesive strategy to ensure both compliance with disclosure norms and arriving at the optimum level of wealth tax payable. Further, individuals subject to the wealth tax net should consider the timing of divesting assets to ensure the maximum benefit is derived by way of optimizing wealth tax dues.