Rahul Mehta Gandhinagar LsCandidate
A summary of proposed wealth tax
.
Full draft is at https://www.facebook.com/groups/ProposedLawDrafts/1868811456669516/
.
If you support this law, pls send tweet to @PmoIndia . " @PmoIndia print #WealthTax law at mygov.in/comment/101416021 sh1= #1e44aa1f17c5139330e8cf62e29f5eddcbb12122 to reduce land prices, "
.
-------
.
Wealth of 1500 sqft of land and 3000 sqft of construction of "family" (husband, wife, 2 kids, one senior citizen parent) will be exempt. Plus many small exemptions
.
The proposed annual tax will be
.
[1% * [value of (wealth - minus 1500 sqft of land etc)] - income tax paid - (5% to 15% of salaries paid - minus Rs 500 per individual who git social service from that person/trust - some other deductions]
.
So the tax will mainly fall on unused land. So people like Gdrj, T, B, missionaries, adni, sbhai or ahmedabad, apex congress / rss / aap leaders etc will face huge tax on their plots. So they will have to sell or rent their plots. So land prices will fall.Rents will fall. So businesses and industry will grow. And income tax collection will increase and unemployment will reduce.
.
SOME DETAILS AND EXAMPLES
-----------------------------------------------
.
(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.
.
(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) 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.
.
(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).
.
(5) Example - 1 :
.
(5.1) 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.
.
(5.1) This can be one home or split amongst multiple home, offices of shops.
.
(5.1) 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.
.
(5.1) 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.
.
(5.1) 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
.
.
(6) Example - 2
.
(6.1) 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.
.
(6.2) 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
.
(6.3) so in this case wealth tax payable will be Rs 3200 crore or so.
.
.
(7) Example - 3 :
.
(7.1) 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
.
(7.2) 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
.
(7.3) 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)
.
(7.4) 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.
.
(7.4) 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.
.
(7.5) 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
.
(7.6) 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.
.
(7.7) 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.
.
.
(8) Example – 4 :
.
(8.1) 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
.
(8.2) 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
.
(8.3) so two flats will face no wealth tax, and remaining 18 flats will face wealth tax of Rs 50000 each
.
(8.4) 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.
.
(8.5) say each tenant is using electricity of Rs 40000 per year, and tax on electricity is say Rs 10000 per year
.
(8.6) 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.
.
(8.7) but if he keeps all his flats unrented and vacant, then wealth tax will be Rs 50000 per flat
.
.
(8.8) 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.