Smart ways to avoid wealth tax!!

THERE is a game that can tell you what is on people’s minds.

You say a word (say, ‘woman’), and give the other person a second to respond to it with the first word that comes to his mind. Some would say ‘beautiful’. Some might say ‘painful’, and so on.

Now let’s say the word is ‘tax’. What comes to your mind? Ten to one, it would be ‘avoid at all cost’.

And it would be a good answer. If you avoid tax legally, that is. Here are some ways you can do it.

As an individual tax payer or a Hindu Undivided Family, if your net wealth is over Rs 15 lakh (Rs 1.5 million), you can avail of exemptions on your assets. You can reduce your wealth tax to zero.

The easiest way is through property. To get maximum benefits, ensure that every adult family member purchases one immovable property in his/her own name.

Here’s why

i. Let’s say you are planning to buy a bungalow for Rs 80 lakh (Rs 8 million). Your wealth tax liability would be zero since, as per provisions in the Wealth Tax Act, 1957, one property is fully exempt from the purview of wealth tax.

So it would make sense to buy one property per adult in a family to reap the best of this provision.

ii. All commercial properties are fully exempt from the purview of wealth tax. So if you are holding commercial property — let’s say a shop, an office space or a factory building — don’t worry. You can own as many commercial properties as you like in your own name without having to worry about paying wealth tax.

iii. The Wealth Tax Act also says that all residential properties given on rent for over 300 days a year are exempt from wealth tax.

iv. What’s more, Section 5 of the Wealth Tax Act says the exemption for house property extends to vacant land up to 500 square metres (about 5,381 square feet).

It is not difficult to avoid tax legally. This is a double benefit because real estate is a highly appreciable asset.

Now you know what you will say if someone says ‘tax’ to respond to: Profit!

Author: Subhash Lakhotia
Source: Wealth, MoneyControl