Rahul Mehta Gandhinagar LsCandidate

Proposed wealth tax draft
====================
.
---------------------------------
Proposed WTMIT (i.e. Wealth Tax minus Income Tax paid minus Other Credits) law-draft
----------------------------------
.
[ comment : This WTMIT law-draft can be passed by Loksabha as Money Bill and doesn’t need permission of Rajyasabha
.
This draft has 3 parts -
.
Part - I : Basic instructions for citizens
.
Part - II : A summary
.
Part - III : Instructions for Citizens, Officers and comments
.
Important clauses are – (3), (4.1), (5.1), (6.1), (6.3) and (6.4). clause-(7) doesn’t play important role as it expires after 3 years after the law is passed ]
.
-----------------------------------------
Part - I : Basic instructions for citizens
------------------------------------------
.
(1) Making list of wealth items
.
(1. 1) Once this law is passed, every person will need to make a list of all the major wealth items he owns, such as land plots, flat, gold/silver bars, other precious metal bars, precious stones, jewels, shares, bonds, machinery, and large furniture items etc. (except furniture of Rs 400,000 per family member as explained later). The list need not have funds he has in banks and govt bonds.
.
(1.2) For land and plots purchased in past 7 years, the owner will need to state address and (to the best of his information and memory), the date of purchase and price he purchased at, and value additions he has done in past 7 years (example – if he has added construction etc on that flat) along with dates of value additions etc. For flats and plots purchased before 7 years, he only need to state date of purchase, address and area. And if he has more than one flat / plot, then he needs to obtain and state circle rate for land and construction in each of them as well.
.
(2) If any item exceeds the basic exemption for that item, then the property owner must file a wealth tax return showing list of items, values, wealth tax credits and wealth tax due, and may need to pay wealth tax as described in later clauses. If each item is below exemption limit, then filing wealth tax return will be optional.
.

------------------------
Part – II : A summary
------------------------
.
(3) Comment :
.
(3.0) This summary is not binding. It is only a declaration, giving an approximate vision of what this law is.
.
(3.0.1) As per this law, about 25 sqmt of non agricultural land, 50 sqmt of construction, 2 acre of agricultural land per person, and 4 times to 6 times this quota per family will be exempt from wealth tax. In addition, 100 gram of gold per male and 500 gram of gold per female will be exempt.
.
(3.0.2) In addition, whatever --- (a) income tax that a person has paid on non-salary income, (b) 50% of income tax paid on own salary income, 50% of income tax paid by employees on their salary income or 5% of salaries paid employees, (c) 15% of PF paid to staff (d) electricity tax, fuel tax, GST etc tax paid --- will be WTC = Wealth Tax Credit. And in addition, a charitable trust or person can claim upto Rs 500 per year of wealth tax savings for every person he serves. These will be WTC = Wealth Tax Credit.
.
(3.0.3) Now whatever is the value of wealth above exemptions, 1% of the value of wealth MINUS WTC = Wealth Tax Credit will be the amount payable to Central Govt. And if this amount is negative, then it becomes credit for next year.
.
(3.0.4) So it is very IMPORTANT to note – the wealth tax as per this law is NOT 1% of wealth value. But its [(1% of value of (wealth – several exemptions) – income tax paid – 5% of salaries paid – several other credits]. And net wealth tax payable is zero if above sum is negative i.e. credits exceed 1% of value of (wealth – exemption).
.
(3.1) Example - 1 :
.
(3.1.a) Say a person has family of himself, his wife, 2 children and 2 senior citizen parents. Then 150 sqmt of urban land and 300 sqmt of construction will be exempt.
.
(3.1.b) This can be one home or split amongst multiple home, offices of shops.
.
(3.1.c) Say he has flats that measure 150 sqmt land and 300 sqmt construction. And say he has one office over and above this exemption limit, and say that office’s value is Rs 1 crore.
.
(3.1.d) Say salaries he has paid to staff of say 5 employees is Rs 12 lakh per year. Say PF paid to his staff was Rs 1 lakh. Say electricity bill was Rs 3 lakhs per year and tax paid was Rs 1 lakh in that year. And say income tax on his income was Rs 3 lakhs.
.
(3.1.e) So total WTC will be (income tax he paid + 15%*PF + 5% of salary he paid + electricity tax) = (Rs 300,000 + 15% * Rs 100.000 + 5% * Rs 12,00,000 + Rs 100,000) = (Rs 300,000 + Rs 15,000 + Rs 60,000 + Rs 200,000) = Rs 575,000. So wealth tax payable will be zero, and credit for next year will be Rs 475,000
.
.
(3.2) Example - 2
.
(3.2.a) say a trust has 4000 acres of land in Mumbai, where circle rate is Rs 200,000 per year. Then price of that land will be Rs 320,000 crore and wealth tax due before credits will be 1% of this amount i.e. Rs 3200 crore.
.
(3.2.b) Now if that trust has minimal salaries to employees, not much activities and not much income tax paid, then wealth tax credits can be almost zero
.
(3.2.c) so in this case wealth tax payable will be Rs 3200 crore or so.
.
.
(3.3) Example - 3 :
.
(3.3.a) say a person owns 200 sqmt of land on which he has 4 flats of 100 sqmt each, totaling 400 sqmt. Say price of each flat is Rs 50 lakhs
.
(3.3.b) say he has 4 family members and exemption is 25 sqmt of land and 50 sqmt of construction per family member. So total exemption will 100 sqmt land and 200 sqmt construction
.
(3.3.c) so two flats will face no wealth tax, and remaining 2 flats will face wealth tax of Rs 50000 each. Total wealth tax due to ownership flats = (Rs 100,000 minus credits described below)
.
(3.3.d) say he has rented three flats and is Rs 120,000 per year from each flat. Total rent income = Rs 360,000 per year. The income tax on such rental income will be create income tax of about Rs 40000 per year, assuming that tenant has other incomes which put him in 20% income tax bracket.
.
(3.3.e) say each tenant is consuming electricity worth Rs 40000 a year (a year, not month) and tax he pays on that electricity is Rs 10000 per year.
.
(3.3.f) so total wealth tax payable on all three flats will be effectively = Rs 100,000 – Rs 40000 – Rs 10000 * 3 = Rs 30000, which is about 8% of his total rental income over and above income tax he has to pay on his rental income
.
(3.3.g) but if say all his flats are vacant, then he will have to pay income tax of Rs 50000 for two of his flats, totaling Rs 100,000.
.
(3.3.h) Now if that flat owner has other incomes, from which he is paying income tax, then that income tax too will get subtracted from, and so final wealth tax will be zero.
.
.
(3.4) Example – 4 :
.
(3.4.a) say a person has 1000 sqmt of land on which he has 20 flats of 100 sqmt each, totaling 2000 sqmt. Say price of each flat is Rs 50 lakhs
.
(3.4.b) say he has 4 family members and total exemption is 25 sqmt of land and 50 sqmt of construction per family member. So total exemption will 100 sqmt land and 200 sqmt construction
.
(3.4.c) so two flats will face no wealth tax, and remaining 18 flats will face wealth tax of Rs 50000 each
.
(3.4.d) say he has rented these flats and rent is Rs 150,000 per year from each. The income tax on such rental income will be create income tax of Rs 30000 per year, assuming his income all falls in 30% income tax bracket.
.
(3.4.e) say each tenant is using electricity of Rs 40000 per year, and tax on electricity is say Rs 10000 per year
.
(3.4.f) then per flat, Rs 30000 + Rs 10000 = Rs 40000 will be deducted from wealth tax, and wealth tax that the owner will have to pay will be effectively Rs 10000 per flat only, which is about 7% of rent, over and above income tax he has to pay.
.
(3.4.g) but if he keeps all his flats unrented and vacant, then wealth tax will be Rs 50000 per flat
.
.
(3.5) So one possible conclusion from examples can be : So in general, those who are using land and construction for rent and doing industrial or business activities, as per this law, due to wealth tax credits, may not have to pay much wealth tax. But those who have huge amount idle land and construction, but not much business or industrial or rental activities, may have to pay a huge amount of wealth tax.
.

-------------------------------------------------------
Part – III : Instructions for Citizens, Officers and comments
-------------------------------------------------------
.
(4) Basic exemption from wealth tax –
.
(4.0) The wealth tax on an individual will be zero when wealth items he and his family own are below certain limits. The clauses below give these basic exemption limits.
.
(4.0.1) The exemptions for persons above 60 years will be twice than basic exemptions listed below. And for those above 80 years will be 4 times the basic exemptions.
.
(4.0.2) Whole or part of some of the unused exemptions can be transferred to a family member, and certain constraints will apply.
.
(4.1) Basic exemptions per individual are as follows
.
(4.1.1) LNA : The non-agricultural plots of 25 sqmt per person in A1 cities and A cities (CCA classification) OR 50 sqmt in other cities but not both will be exempt ; and unused exemption can be transferred to one or more family members.
.
(4.1.2) C : construction above 50 sqmt per person in A1 cities and A cities (CCA classification) or 100 sqmt in other cities, but not both, will be exempt from this wealth tax; and unused exemption can be transferred to one or more family members.
.
(4.1.3) LA : agricultural land below 2 acres per family member will be exempt from wealth tax; and unused exemption can be transferred to one or more family members
.
(4.1.4) G : gold \ silver \ diamonds \ precious stones \ jewelry worth below 100 gm of gold or equivalent per male person and below 500 gram equivalent per female person ; and unused exemption can be transferred to one or more family members
.
(4.1.5) B : funds in banks such as savings, current, FDs etc will be exempt from wealth tax ; govt bonds too will be exempt from wealth tax
.
(4.2) Additional basic exemptions will be as follows
.
(4.2.1) V : vehicles worth below Rs 5 lakh per person ; and unused exemption can be transferred to one or more family members.
.
(4.2.2) H : cash-in-hand below Rs 1 lakh plus 10% of income tax paid in past year per person; and unused exemption can be transferred to one or more family members.
.
(4.2.3) F : furniture, household and personal electrical items, household and personal electronic items including PCs, below Rs 4 lakhs per family member; and unused exemption can be transferred to one or more family member ; the owner can claim depreciation to lower the wealth tax.
.
(4.2.4) M : industrial machinery : no exemptions, but owner can claim depreciation to lower the wealth tax
.
(4.2.5) AF : expensive artforms such as sculptures and paintings will have exemption of upto Rs 4 lakh per family member and it will be transferable.
.
(4.2.6) Exemptions on shares, bonds and debentures
.
(4.2.6.1) SX : shares / bonds / debentures etc issued by partnerships and limited companies will be exempt from wealth tax ; shares \ bonds \ debentures issued by public companies, in which companies are paying wealth tax on their shares \ bonds \ debentures, the shareholder will not have to pay wealth tax on them
.
(4.2.6.2) SY : shares \ bonds \ debentures owned in public companies in which companies are not paying wealth tax, the share-owners will have to pay ; the exemption per person will be Rs 10 lakhs and this exemption is not transferable
.
(4.2.7) FW : wealth outside India – (a) wealth owned by Indian citizens, Indian companies and Trusts, living and working abroad, which was obtained via their income abroad, will not be taxable in India (b) wealth abroad obtained by income earned in India will be taxable in India and there will be no exemption ; the wealth tax paid there will get deducted depending on applicable international treaties
.
(4.2.8) IP : intellectual property such as software made or owned or bought, brandname, patents, copyrights, will be exempt from wealth tax
.
(4.3) The basic exemptions of female widows, not male widowers, below 60 years, will be also twice. However, for widows of age above 60 years, it will be only twice and not four times; and for widows above 80 years, it will be only 4 times and not eight times.
.
(4.4) The basic exemption for all non-person entities, such company of any type, religious trusts and all other trusts, all associations, HUFs etc will be zero. The basic exemption for foreigner persons will be zero. The basic exemptions are only for a living Indian citizen.
.

(5) WTC = Wealth Tax Credits :
WTC i.e. Wealth Tax Credits are amounts that a person gets for paying taxes such as Income Tax, tax on petrol / electricity and other taxes. WTC reduce the net wealth tax payable as WTC can be subtracted from Wealth Tax borne due to ownership of wealth.
.
(5.1) For the years after application of this law starts, the Wealth Tax Credits will consist of following

(5.1.1) IT1 : income tax paid on all non-salary income, including rent income, will be added to WTC
.
(5.1.2) IT2 : 50% of income tax paid on salary and allowance income will be added to WTC of the employee, who had received the salary and paid the tax
.
(5.1.3) SAL : higher of the two – (5% of basic salary paid by employer to an employee OR 50% of the income tax paid by that employee from salary and allowances given by employer), for each employee separately - will become WTC to the employer ; the employee must have mentioned the PAN-ID of the employer in his income tax return (or can mention later after this law application starts) or employer must have proofs of payments; income taxes borne from allowances paid will also count along with income tax from basic salary
.
(5.1.4) OT : 65% of all other taxes paid to central govt, state govt and local govt will become WTC, such as (a) including GST as long as GS continues (b) except wealth tax (c) except customs (d) including taxes paid on electricity, phone, internet, fuel, tobacco, liquor (e) except charges paid for use of water, sewer, parking, road, tolls (f) the tax credit in case of indirect taxes such as GST will be given to buyer and not seller, and buyer will need to have receipts and may have to use specified mode of payments
.
(5.1.5) PF : 15% of PF paid by the employer to the employee will become WTC for employer
.
(5.1.6) CSP : CSP = “Charity Service Points” that the person or a company or a trust or any entity has obtained, multiplied by exemption per CSP i.e. Rs 100 per year; one human individual can give 1 CSP = Charity Service Point each to atmost different 5 persons or entities ; an individual may give multiple CSPs one person or trust or entity ; e.g. an individual all 5 points to one person or trust or entity. PM may reduce or increase the exemption per CSP amount via notification.
.
comment : say a person or a trust has 10 lakh followers and say 7 lakh followers give 1 point each and 2 lakh followers give 2 Points each and say 1 lakh followers give 5 points each. Then total points obtained = 7 lakh * 1 + 2 lakh * 2 + 1 lakh * 5 = 16 lakhs. So WTC will be 16 lakhs points * Rs 100 per point = Rs 16 crore
.
(5.2) penalties paid due to under payment, and interest paid on late payments or under-payments will not be included in WTC
.
(5.3) for WTC, after Wealth Tax law starts, an amount paid will be added to WTC on the date on which payment was made, and cheque was cleared, and not date on which payment accrued or becomes payable or date on which cheque was issued or given.
.
(5.4) Transfer of WTC from one entity to another
.
(5.4.1) WTC of one individual cannot be transferred to any family member or any other individual or any trust or any public company.
.
(5.4.2) WTC of trust or a public limited company cannot be transferred to its shareholders or trustees or anyone. WTC of a public company can be transferred to its wholly owned subsidiary or vice versa. Any company can transfer its WTC to its wholly owned subsidiary and vice versa, provided company were connected since founding of the subsidiary. If company was acquired later, then only WTC obtained after acquisition can be transferred.
.
(5.4.3) in case of merger or acquisition, the company with higher WIC will become net WIC, but both will not be added.
.
(5.4.4) WTC of a partnership or a private limited company can be transferred to its owners in the proportion of its ownership ; this transferred WTC cannot be retransferred
.
(5.4.5) an individual can transfer his WTC to a partnership or a limited company, provided he must be having over 10% shares of that company for over 2 years, or must have been founding partner. such transferred WTC will become zero if that company is acquired or merged or sold or dissolved; and this WTC cannot be transferred again.
.
(5.4.6) tenant can transfer WTC coming from tax on electricity, water, landline phone and landline internet to the house owner, and in such case owner will get the WTC. The tenant must not have taken these expenses as business expenses in income tax return. The decision of tenant will be final. The owner and tenant can have agreement to split the gains. The owner can use this WTC only to lower the wealth tax of that specific house for that specific year.
.
(5.4.7) any obtained WTC cannot be re-transferred i.e. transfer can be done only once ; own WTC will be setoff before obtained via transfers WTC.
.

(6) Calculation of wealth tax payable and actual amount to be paid
.
(6.1) Calculating value of Taxable Property - I
.
(6.1.1) LNA = value of Land : The owner can subtract the applicable exemptions of himself and his family members such as 25 sqmt of land per family member. He can subtract any plots he wishes, and he need not be living on those plots. The circle rate of remaining plots will be taken to calculate the taxable value of land.

(6.1.1.a) If plot/house was rented when this law was passed, then tenant, and not owner, will file the return. The owner can subtract its land here.
.
(6.1.1.b) If a person owns a flat or office in a complex, then area of land he owns will be decided as per share ownership in the complex or as per pro-rated construction area when complex was formed is there is no share-ownership. In case of disputes, an officer deputed by NWTO (National Wealth Tax Officer) based on agreements in the housing society or commercial complex will decide.
.
(6.1.2) C = value of Construction : The owner can subtract the applicable exemptions of himself and his family members such as 50 sqmt of land per family member. The rest of the construction will be valued at higher of the two (circle rate , purchase price as stated by the owner plus additions as stated by the owner minus depreciation plus indexation).
.
(6.1.2.a) If house was rented when this law was passed, then tenant and not owner will file the return. And owner can subtract its construction here.
.
(6.1.3) LA = value of Agricultural Land : The owner can subtract 2 acre per family member, if applicable. The rest of the land will be valued at circle rate
.
(6.1.4) G = Value of gold, silver, metals, diamonds and precious stone. The owner can subtract 100 gm per male family member and 500 gm per female family member, if applicable. For other metals, NWTO will issue ratio such as 1 gm of gold = 500 gm of silver, as per market rates. The value will be taken at annual average price. The value of labor will NOT be included. Diamonds will be valued at purchase value plus indexation and no depreciation.
.
(6.1.5) B : Funds in banks and govt bonds will be exempt from wealth tax
.
(6.2) Calculating value of Taxable Wealth – II
.
(6.2.1) V = value of vehicles. Depreciation of 15% per year will apply. The owner can subtract Rs 5 lakh per family member as applicable.
.
(6.2.2) H = cash on hand. Cash on hand as on closing date will be taxable. The owner can subtract (Rs 1 lakh per family member plus 10% of income tax paid by that family member in previous year), as applicable. The rest will be taxable cash on hand.
,.
(6.2.3) F = value of furniture etc. Value of furniture. household and personal electrical items, household and personal electronic items including PCs, below Rs 4 lakhs per family member is exempt; and unused exemption can be transferred to one or more family member ; the owner can claim depreciation to lower the wealth tax. The depreciated value after exemptions will be taxable value of furniture etc. The depreciations wil be as per income tax act.
.
(6.2.4) M = value of industrial machinery. No exemptions, but owner can claim depreciation, as per income tax act, such as 15% per year, or as allowed in the income tax act, to lower the wealth tax. The depreciated value will be the taxable value of machinery.
.
(6.2.5) AF : expensive artforms such as sculptures and paintings will have exemption of upto Rs 4 lakh per family member and it will be transferable to any family member. The taxable value will be indexed purchase value with no depreciation. The owner may request an appraisal if value is lower than indexed purchase value and in such case officer deputed by NWTO will decide, and decision can be altered by Jurors

(6.2.6) Calculating taxable value of shares, bonds, debentures : (a) For wealth tax purposes, shares , bonds and debentures will be treated in same way (b) wealth tax on govt bonds, PSU shares, PSU bonds, PSU debentures will be zero (c) wealth tax on partnerships and limited companies will be zero (d) for public limited companies, wealth tax on shares will be paid by company or by individual shareholders but not both. (e) the public company shall decide whether company shall pay WT or shareholder shall pay, and the decision will be made at the time of creating the company, and can be changed by 1 year notice. (f) the existing companies, on the day of passing of this law, will have to decide within 3 months. If they don’t decide, then it will be assumed that company has agreed to pay the WT.

(6.2.6.1) SX : . taxable value of public company share where company is paying wealth tax. The taxable value will be = [average market capitalization of company during the year – 5 * (LNA + C + LA + G + V + H + F + M + AF ) – SY] where, SY is the taxable value of shares that that company owns, whose companies are not willing to pay the wealth tax and shareholders are paying. And if SX is negative, then SX will be taken as zero. Please note that value of some assets that company owns, except taxable shares it owns, are multiplied by five.
.
(6.2.6.2) SY = taxable value of public company share where company is not paying wealth tax , will be the [average market share price during the year – minus (wealth tax paid by company per share * 1/R]) , where R is the wealth tax rate. R will be 1% unless PM changes it. If the share is held not for whole year, but a duration, then price will be average price over that duration, and that fraction of the year will be multiplied. The average daily price of the share will be calculated by NWTO.
.
(6.2.7) FW = wealth in foreign countries bought from income earned in India will be valued at purchase value in Indian rupees when purchase was made, and indexation in Indian rupees. Applicable deprecations will apply as per income tax act. If Wealth Tax is paid in the country in which the wealth is, then that wealth tax will be subtracted from wealth tax payable on foreign wealth.
.
(6.2.8) IP : intellectual property such as software made or owned or bought, brandname, patents, copyrights, will be exempt from wealth tax
.
(6.2.9) RP = Wealth Tax on Rented property : wealth tax on rented property will be calculated as follows :-
.
(6.2.9.1) if rental agreement was made after application of this law starts, then complete wealth tax will be on the owner only. The owner and tenant must factor in wealth tax before they make the rent agreement. The land/construction exemption of tenant to lower the wealth payable will not be allowed. But tax that tenant pays on electricity, water, land line phone connections and land line internet connection can be added to Wealth Tax Credit of flat owner, if tenant and flat owner both agree.
.
(6.2.9..2) Within 6 months after law’s application starts, tenant will be free to break rental agreement without any penalty. The owner gets no such privilege from this clause. In such case, for these 6 months, neither owner nor tenant will have to pay any wealth tax over this house.
.
(6.2.9.3) If rental agreement was made before the application of this law, and tenant wishes to continue for over 6 months after the law is applied, then the tenant will pay the entire wealth tax on the house or office till he vacates. The tenant can use his zero or whole, but not part, of his land / construction exemption towards that house to lower the wealth tax. And his one spouse and atmost 2 children below 18 years, and atmost 2 of the parents and parents-in-laws, can use zero or whole but not part of their basic exemptions of land and constructions to lower the wealth tax payable. The persons whose exemption is used need not be living there. Exemptions of other relatives cannot be used. Exemptions of owner cannot be used to lower the wealth tax. Tax on electricity, water, landline phone, landline internet can be used to lower the wealth tax payable. WTC of owner cannot be used to lower the wealth tax of such house. The return for such rented property will be filed separately by the tenant, and owner must show a nil entry for such house stating name and details of tenant, and address of the property.
.
(6.3) TTW = Total Taxable Value of Wealth : Total taxable value of wealth of a person or trust or non-public company or any entity will be (LNA + C + LA + G + V + F + M + AF + SY + FW + RP) , after subtraction of applicable exemption of the wealth owner and his family members. And for public companies, willing to pay wealth tax on its shares, the amount SX described in above clause will get added this sum stated here.

(6.4) WT = wealth tax to be paid : Wealth tax to be paid, per year. will be [(1% of TTW) minus PWTC minus WTC] i.e. From (1% of TTW), PWTC can be subtracted. (PWTC is explained in later clauses). Once PWTC is exhausted, WTCs for FYs in increasing order i.e. oldest WTC first, will be subtracted. If the final amount is positive, then that much WT will be paid. If final amount is negative, then PWTC or WTC will be reduced, but WT to be actually paid will be zero. The balance amount of PWTC and WTC can be used in coming years to setoff wealth tax in the coming years.
.
[comment : say wealth tax law applies from 1-apr-2019. Say PWTC is Rs 20 crore. And say WTC for FY-2019-2020 is Rs 10 crore. Now
.
(a) say WT1 for FY-2019-2020 is Rs 13 crore. Then PWTC will be will be partially setoff and actual rupee to be paid will be zero. PWTC available for next year will be Rs 7 crore and WTC available for next year will be Rs 10 crore.
.
(b) say WT1 for FY-2019-2020 is Rs 21 crore. Then PWTC will get fully used, and WTC will get partially used, and WTC available for next year will be Rs 9 crore.
.
(c) say WT1 for FY-2019-2020 is Rs 43 crore. Then PWTC will all get fully used, and WTC will too will get fully used. And the owner will have to Rs 13 crore as WT. And next year, PWTC and WTC will be zero.]
.
(6.5) The “1%” rate can stated above be changed by PM depending on requirement of essential govt bodies such as Military, Police, Courts, Roads, Maths / Science / Weapon-use Education and other necessary expenses needed for survival of Government and protection of wealth from enemies and criminals.
.
(6.6) In case of inability to pay, the property owner can request locking of his property, and in that case interest of 12% per year will apply. However, the value of property must be at least twice the outstanding tax. If value of property falls below twice the outstanding tax, then NWTO can order auction or the property, except in case when owner is female or male above age of 60 years and property is the only house she or he processes. In such case, the outstanding tax will keep accumulating and will be adjusted upon sale or inheritance.
.

(7) PWTC = Previous Wealth Tax credits i.e. Wealth Tax Credits for income tax and other taxes paid in the previous years : Several taxes and other payments made in past 4 years, minus possible wealth tax in past 4 years, will become PWTC. PWTC will play role only for 3 years after this law’s application starts/
.
(7.1) PWTC will be calculated for each financial year separately. It will be labeled as PWTC-AY-yyyy-(yyyyy+1) i.e. PWTC for Assessment Year yyyy to (yyyy + 1)
.
(7.2) PWTC will be calculated for 4 years before this wealth tax law starts.
.
[ comment :
.
As per definitions in existing Income Tax Act
(a) FY = Financial Year
(b) AY = Assessment Year.
(c) FY-(yyyy)-(yyyy+1) = AY-(yyyy+1)-(yyyy+2). e.g. FY-2018-2019 is AY-2019-2020 and vice versa.
(d) year starts from 1-apr and ends at 31-mar. e.g. FY-2018-2019 will deal with transactions done in date starting 1-apr-2018 to 31-mar-2019.
.
This Wealth Tax Act follows same definitions for FY and AY.
.
say wealth tax starts from 1-apr-2019.
.
PWTC1 = PWTC-FY-2018-2019 = wealth tax credit generated out of taxes paid for FY-2018-2019 = AY-2019-2020 = interval from 1-apr-2018 to 31-mar-2019
.
PWTC2 = PWTC-FY-2017-2018 = wealth tax credit generated out of taxes paid for FY-2017-2018 = AY-2018-2019 = interval from 1-apr-2017 to 31-mar-2018
.
PWTC3 = PWTC-FY-2016-2017 = wealth tax credit generated out of taxes paid for FY-2016-2017 = AY-2017-2018 = interval from 1-apr-2016 to 31-mar-2017
.
PWTC4 = PWTC-FY-2015-2016 = wealth tax credit generated out of taxes paid for FY-2015-2016 = AY-2016-2017 = interval from 1-apr-2015 to 31-mar-2016 ]
.
(7.3) PWTC from income tax – (a) PWTC from income tax will not exceed total income tax paid. (b) Taxable income will be divided into 2 heads – taxable income coming from salary and taxable income from non-salary sources (c) pro-rata income tax paid on non-salary income will be added to PWTC (e) pro-rata 50% income tax paid on salary income will be added to PWTC (e) calculation will be done in a way that makes PWTC lowest possible
.
[ comment-1 : if salary portion in taxable income was say Rs X and non salary portion was say Rs Y and total taxable income was Rs (X + Y). Say total tax paid was Rs T. Then tax from salary income will be deemed as Rs T * X / (X + Y) and tax paid from non-salary income will be deemed as Rs T * Y / (X + Y). So PWTC will be Rs T * X / (X + Y) + (Rs T * Y / (X + Y))/2 .
.
comment-2 : Say entire taxable income is non-salary. Then PWTC will be equal to income tax paid. And say entire taxable income was from salary. Then PWTC will be equal to half the tax paid.
,
comment-3 : in case of ambiguity, salary component should be kept maximal and non-salary component should be kept minimal. Eg say salary income was say Rs 300,000 and non-salary income was say Rs 500,000 and PPF deposited was say Rs 100,000, and other than PPF and standard deduction, there were no other deductions. Then taxable income was say (Rs 300,000 + Rs 500,000 – Rs 100,000 – Rs 250,000) = 450,000. Then while calculating share of salary income and non-salary-income in taxable income, entire PPF and basic should be subtracted from non salary income, so that PWTC becomes lowest possible.
.
comment-4: Say total taxable income was Rs 800,000 and total tax paid was say Rs 200,000. Say salary component in taxable income was say Rs 300,000 and say non-salary component was Rs 500,000. Then PWTC from non-salary will be (Rs 200,000 * Rs 500,000 / Rs 800,000) = Rs 125,000 . And PWTC from salary portion will be (Rs 200,000 * Rs 300,000/ Rs 800,000)/2 = Rs 37,500. To total PWTC will be Rs 162,500 .
.
(7.4) To every employer, 15% of the employer side PF paid by the employer will be added to PWTC of employer
.
(7.5) To every employer, a portion of basic salary he has paid to employee will be added to PWTC. The portions will be as (0% of basic salary below Rs 5 lakhs, 5% of basic salary between Rs 5 lakhs and Rs 10 lakhs, 10% of basic salary between Rs 10 lakhs and Rs 20 lakhs , and 15% of basic salary over Rs 20 lakhs). The basic salary amounts mentioned here are annual across whole FY. And only basic salary will be taken - allowances will not be included. This addition will be available only if the employee had disclosed the salary in income tax return OR employer had paid by cheque, and has employer has proofs.
.
(7.6) 50% of following taxes paid (a) service tax (b) excise (c) gst (d) vat (e) cst (f) local property taxes (g) pay roll tax (h) professional tax paid will be added to PWTC for that FY (i) state entry tax
.
(7.6.1) Following will not be added to PWTC - (a) water, parking and sewer charges (b) customs duty (c) any type of taxes paid on petrol, fuel, electricity, tobacco, alcohol, gold, silver, telephone and internet (d) entertainment tax (e) octroi and local body tax on goods (f) taxes paid not listed in above clause
.
(7.6.2) in case of indirect taxes like excise, gst, vat, service tax, cst, entry tax etc , PWTC in this clause will given to seller and not buyer, and only if seller had applicable registration number, and proofs of payment match with govt records.
.
comment : in WTC, buyer gets the credit, while in PWTC, seller gets the credit
.
(7.7) The penalties and interest paid due to non-payment or late-payment on above mentioned taxes will be added to PWTC, in the same ratio that applies on that specific tax. All payments must have been done within six months after this law is passed, and before PWTC claim is filed.
.
(7.8) PWTC will consider date payable and not actual date of payment. And if PWTC is taken, then payment must have been made within 6 months after this wealth tax law is passed and before PWTC is claimed. If payment is not made, it will not be added to PWTC
.
(7.9) Any person can give 1 CSP = Charity Service Points each to 5 trust or any person or any entity that had given him service in past 4 years. He may give more than one point or all 5 points to one entity. Number of Points multiplied obtained by Rs 100 will be added to PWTC4 of that entity. This PWTC is transferable once.
.
(7.10) From sum of 4 PWTCs of 4 years, 4% of value of land will be subtracted. The value of land will be as per circle rate. No other subtraction will be done. If final amount after subtraction is negative, then PWTC will be zero. And if amount is positive, then that amount will become PWTC useable for coming years.
.
(7.11) If PWTC is above Rs 1 crore, then person\entity must claim all PWTC they wish to claim within 6 months after this law is passed. Those who PWTC is below Rs 1 crore can claim within 18 months. After duration, if no claim is filed, then PWTC prepared by NWTO for him will be taken as final. If he claims PTWC, then after claiming PTWC, he must keep records of payment and income tax returns for 4 more assessment / financial years after this law is passed.
.
comment : Say wealth tax law becomes applicable as from 1-apr-2019. Then records of FY-2014-2015, if PWTC for that year is taken, will be preserved till 31-mar-2024.
.
(7.12) In case of dispute on PWTC amount, the bank records and govt records will be deemed final in case of discrepancy. The Jurors may revise the amount after a trial
.
(7.13) Transfer of PWTC – (a) PWTC of one individual cannot be transferred to any family member or any other individual or any trust or any public company. (b) PWTC of trust or a public limited company cannot be transferred to its shareholders or trustees or anyone (c) in case of merger or acquisition, the company with higher PWIC will become net PWIC, but both will not be added. (d) Part or whole of PWTC of a partnership or a private limited company can be transferred to its owners in the proportion of its ownership (e) an individual can transfer part of whole of his PWTC to a partnership or a limited company, provided he must be having over 20% shares of that company on the day of passing of this law, and company must have existed at least 2 years before this law was passed. Such transferred PWTC will become zero if that company is acquired or merged or sold or dissolved (f) obtained PWTC cannot be re-transferred to anyone i.e. transfer can be done only once.

comment : Say a company has .PWTC of Rs 20 crore. It can decide to transfer whole of part of its PWTC to its partners. Say it transfers say Rs 12 crore of its PWTC to its partners. Then transfer must be made exactly in ratio of ownership of existing (not past) owners.
.
(7.14) PWTC will become unusable 3 years after this law’s application starts. And PWTC cant be inherited.
.
comment : say law’s application starts on 1-apr-2019. Then PWTC can be used to set of WT of FY-2019-2020, FY-2020-2021 and FY-2020-2021, but no later.

(8) Eligibility to become family member and transfer basic exemptions
.
(8.1) For the purpose of wealth tax exemption, an individual can register himself as solitaire i.e. alone and not part of any family or part of family. which ever suits him best.
.
(8.2) If a adult person’s wealth’s value, after subtracting any 50 sqmt land of his choice and upto 100 sqmt construction on those plots, is above Rs 25 crore, then that person cannot give or take exemption from anyone. So for purpose of wealth tax, he must file return as solitaire only.
.
(8.3) A family will have one person who is Head of the family, who can be male or female above 18 years of age. The Head must agree to make a person member of the family and the person must also agree to make him member of family. And if the person is minor, then mother will decide whether child shall be member of family or not
.
(8.4) Following can be members of family :
.
(8.4.1) The children of Head or spouses of any age can become member of the family. The children from previous marriage can also become member. For the purpose of wealth tax, only at most 4 children can be member of the Family.
.
(8.4.2) The parents and parents-in-law can become member of the family. But parents-in-law can become family member only if spouse is alive and is also member of the family. And only at most 2 of the parents and parent-in-laws can be member of family.
.
(8.4.3) Children of son / daughter can become member of family , but only if son / daughter is also member of the family.
.
(8.4.4) The children of grand children cannot become member of the family.
.
(8.4.5) Unmarried or divorced sister of the Head can be member of family. Brother of any age can become member of the family. Children of brother or sister can become family, provided brother or sister is also member of the family.
.
(8.4.6) Children of brother or sister can become member of family, if brother or sister are part of family or have passed away.
.
(8.4.7) No one except above can become member of family
.
(8.4.8) A family cannot have more than 12 members.
.
(8.6) One person cannot be member of two families. Persons registered as solitaire cannot be member of any family. Non-person entity or foreigner can not be member of family for wealth tax purposes.
.
(8.7) If a person wants to form family for wealth tax purpose, then he will need to register his family members by personally appearing before Patwari = Talati = Village Officer. And the members too will have too appear at office of any Patwari in India and acknowledge it. For minors, permission of mother will be needed. The minor need not appear at the office.
.
(8.8) The family members can transfer their basic exemptions amongst themselves
.
(8.9) The family members cannot transfer their PWTC or WTC to anyone. They can only transfer exemptions

(9) Filing wealth tax return
.
(9.1) Each wealth owner, except Indian citizens who have wealth above basic exemptions stated here, all foreign entities, all companies, all trust and all entities who own or can own, must file one wealth tax return every year. Those whose taxable wealth is above Rs 100 crore shall file one provisional return one every month and pay tax monthly, and also file an annual return.
.
(9.2) The annual wealth tax return must be filed within 210 days after closing of financial year or must be filed within 60 days after income tax return is filed, whichever earlier. Monthly return should be filed within 60 days after end of the month.
.
(9.3) The tax payer can use his PAN-ID or Aadhar-ID to file his wealth disclosure. If he doesn't have any of the two IDs, then he must obtain one ID within 3 months after this law is printed in Gazette.
.
(9.4) For HUF, the Karta will need to file a separate annual return. The HUF has no basic exemptions and cannot take exemptions from members in HUF, except in case of land and construction. In case of one land and construction owned by HUF, the members of HUF may transfer zero or whole, but not part of, their basic exemptions of land and construction, to HUF.
.

(10) NWTO : National Wealth Tax Officer, other main officers and their staff, offices : -
.
(10.1) The PM will appoint an officer titled as NWTO = National Wealth Tax Officer to collect wealth tax. The citizens of India may replace him using Right to Recall NWTO clauses listed in RTR-NWTO clause
.
(10.2) NWTO will prepare guidelines and give requirements of funds for running his offices across India. The guidelines will come into effect after PM prints them in Gazette or after MPs pass them as legislation or after citizens approve them using clauses given in the TCP-section of this draft
.
(10.3) NWTO will recruit existing officers from Central Govt or any State Govt , after approval of their respective heads. NWTO will appoint one SWTO = State Wealth Tax Officer , one DWTO = District Wealth Tax Officer per District, and appoint one TWTO = Tahsil Wealth Tax Officer per Tahsil. They will all work under Central Govt under NWTO.
.
.
(11) Guidelines to make wealth tax rules and change wealth tax rules.
.
(11.1) Parliament may amend this wealth tax law as necessary. PM too may make rules and amend the rules under this law using GNs as needed.
.
(11.2) NWTO may issue circulars to calculate and collect wealth tax as needed.
.
(11.3) When PM or Parliament or NWTCO issue any change or circular, it will be sent to all DWTO across India who will summon 12 Jurors at random. DWTO will explain the circular to the Jurors and Jurors may ask any CA or any person to present his views on the circular. And if majority of Jurors across India oppose the circular, then MPs, PM or NWTO may or need not resign , and may or need not cancel the change or circular. Their decision will be final.
.
(11.4) The citizens may issue a circular using CV-clauses given in this draft.
.
.
(B) Basic definitions
.
(B.1) The word citizen in this draft would mean a registered adult voter
.
(B.2) The word land in this draft will include all plots, agricultural land and flats, offices, buildings, ownership over a plot created by owning a construction. And the word flat in this draft will include all construction --- apartments, bungalows, offices, buildings, warehouses, industrial shades and all other constructions.
.
(B.3) what is comment : The comments are not part of actual code of this legislation draft. The activists and voters may use comments to understand the draft. And Jurors may use comments as a reference to decide a case. But the comments are NOT binding on anyone.
.
.
(J) - Jury Trial for wealth tax disputes
.
(J.1) Wherever there is dispute between NWTO or his officer and tax payer, NWTO or his officers will form a CCA = Committee of Chartered Accountants and form a Jury to decide the case. This section gives rules of formation of CCA and the Jury.
.
(J.2) NWTO will appoint a Jury Administrator for each District called as DJA = District Jury Administrator, and one Jury Administrator for each State called as SJA = State Jury Administrator, and one Jury Administrator for India called as NJA = National Jury Administrator
.
(J.3) Resolving a Wealth Tax Dispute
.
(J.3.1) A tax dispute between a tax payer and tax officer will be filed in district in which tax payer is voter of or is resident of or has registered offices, in that order. Or, it can be in the District where wealth is located, in case the wealth is land or construction. If the tax payer or tax officer wants to change the venue to a district in same state, then may get order from SJA or State High Court. And if either of the two wish to change venue to a district in India outside the State , then he may get order from NJA or Supreme Court.
.
(J.3.2) For every tax dispute in district, the DJA = District Jury Administrator will randomly select 3 to 10 CAs from a list of CAs who have agreed to provide assistance in cases. The CAs selected must be between the age of 30 years and 55 years, and must have 5 years of experience as CA.
.
(J.2.3) DJA will randomly select voters from voter list of India between age of 30 and 55 years. The person must not have appeared in any Jury in past 10 years and must not have faced any conviction in past.
.
(J.3.3) Number of Jurors : The number of Jurors will be at least 12 and at most 1500. The number of Jurors will be 12, if the wealth tax evasion as claimed by WTO = Wealth Tax Officer is below Rs 10 lakh. And there will 1 extra Jurors for every Rs 10 lakhs of wealth tax evasion as claimed by WTO. The highest size will be 1500 Jurors
.
(J.3.4) Location of Jurors : The Jurors will be selected from Districts whose District Courts are linked via video conferencing to districts where trial is being run. In the district isn't connected with any district via video conferencing, then all Jurors will be from District where the case is filed.
.
(J.3.5) Disputes of valuation of wealth - if the dispute is only over valuation of land, then dispute will resolved by the Jurors in that district. The number of Jurors will be 12 + plus 1 Juror per Rs 10 lakh of difference in valuation , with maximum of 1500 Jurors. However , DWTO, SWTO or NWTO may ask for change of venue to decide the valuation of the land.
.
(J.3.6) Appeal against judgment of of District Jurors can be filed with Jurors or Judges in State High Court and later with Jurors or Judges in Supreme Court as decided by other prevailing laws
.
.
(RTR) Right to Recall NWTO
.
(RTR.1) If any citizen of India wishes to become NWTO , and he appears in person or via a lawyer with affidavit before the Cabinet Secretary, then the Secretary would accept his candidacy for NWTO after taking filing fee same as deposit amount for MP election.
.
(RTR 2) If a citizen of that district comes in person to Talati's office, pays Rs 3 fee , and approves at most five persons for the NWTO position, then the Talati would enter his approvals in the computer and would him a receipt with his voter-id#, date/time and the persons he approved.
.
(RTR.3) The Talati will put the preferences of the citizen on PM's website with citizen's voter-ID number and his preferences
.
(RTR.4) If a the citizen comes to cancel his Approvals, the Talati will cancel one of more of his approvals without any fee
.
(RTR.5) On every 5th of month, the CS may publish Approval counts for each candidate as on last date of the previous month.
.
(RTR.6) If a candidate gets approval of over 51% of ALL registered citizen-voters (ALL, not just those who have filed their approval) in a district, then PM may or need not expel the existing NWTO and may or need not appoint the person with highest approval count as NWTO . The decision of PM will be final
.
.
(CV) CV : Citizens’ Voice:
.
(CV.1) If any citizen residing anywhere in India wants any change in this law or has any complaint under this law, then he may submit an affidavit to DC’s designated clerk and clerk will scan the affidavit on put on CM’s website along with photo and details of the citizen. The clerk will charge Rs 30 per page. The clerk will issue serial number for the affidavit.
.
(CV.2) If any citizen residing in the area covered by the Patwari wants to register his YES / NO on the affidavit submitted in above clause, then he can go to Talati’s office and provide the serial number of the affidavit and his YES/NO on a form, and Patwari will enter his YES/NO for a fee for Rs 3 . The YES/NO shall come on CM’s website along with citizen’s voter-id, name, date etc
.
======== end of wealth tax draft ===========