The Income-Tax department has trained its guns on the wealth of high net worth individuals (HNIs). And the start has been made by seeking more information from more professionals, owners of proprietary business and partners in firms with annual income of over Rs 25 lakh to declare their wealth in a separate disclosure in the income tax returns' form.
This separate disclosure format, included in the income tax return (ITR) forms for financial year 2012-13, wants details of movable assets like vehicles, yachts, aircraft, bullion, jewellery, works of art, sculptures and paintings. It also asks for details of financial assets such as bank balances, shares, insurance policies and immovable assets like land and buildings.
This makes the going get easy for salaried individuals who may be earning Rs 25 lakh or more and have any of the above listed assets. "This mandate seems to be incomplete because all those in the senior management level today easily earn Rs 25 lakh but will stay out of the ambit because they earn from salary," points out a tax partner from Ernst & Young.
The other point is that there has been a hue and cry over the salary class being penalised with higher taxes or increased compliance, which is probably why that has led to the salaried class being left out, feel tax experts.
An easier way would have been probably to attach an annexure and ask to declare all assets all taxpayers have, opine experts.
This would have needed a lot of compliance and probably things would have fallen in place only in the next few years, but at least all class of taxpayers would have gone through the scanner, they add. This is largely because there are many who might not be earning Rs 25 lakh or more but still have assets worth millions. Of course, it is better to start slowly instead of messing the entire process by including more people.
Even from the HNI perspective, experts point out, another loophole in the new ITR. "It asks for declaring the assets and liability value as on the last day of the financial year (or March 31). Here, the value of assets should be the purchase/acquisition cost and not the market cost," says another tax experts. He feels this will make it easy to escape the wealth tax net. "Say one earns Rs 30 lakh a year and lives in an ancestral house bought in 1950. At that time, it cost Rs 5 lakh. Wealth tax does not apply for assets costing less than Rs 30 lakh," he points out.
However, Kuldip Kumar, executive director (tax & regulatory services) at PricewaterhouseCoopers believes that the fact that one is earning Rs 25 lakh or more and has to declare assets will help catch evaders if income and assets are not proportionate to each other. It's a step taken, at least.