Wealth Tax

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About Wealth Tax

Wealth Tax is levied on the net market value of various assets owned by an individual, such as cash, bank deposits, shares, fixed assets, personal cars, and real property.
Globally, several countries like France, Portugal, and Spain impose wealth tax.
The primary objective of the tax is to target unproductive and non-essential assets of individuals.

Wealth Tax in India

Introduction: The Wealth Tax Act was introduced in 1957 based on the recommendations of the Kaldor Committee (1955) as a part of tax rationalization measures.
- It imposed a 1% tax on earnings exceeding ₹30 lakh per annum for individuals, Hindu Undivided Families (HUFs), and companies.
Abolition: Abolished in 2015 due to issues such as Extensive litigation, Increased compliance burden, and High administrative costs.
- Replaced by an increase in the surcharge on the super-rich.
Replacement measures: The surcharge for individuals with income exceeding ₹1 crore and companies with income over ₹10 crore was increased from 2% to 12%.

Other Relevant Concepts

Tobin Tax: A tax on financial transactions, especially currency exchanges.
Pigovian Tax: Levied to correct negative externalities (e.g., pollution tax).
Laffer Curve: Demonstrates the relationship between tax rates and tax revenue.
Tax-GDP Ratio: Indicates the tax revenue as a percentage of GDP, critical for fiscal analysis.

Q1) What is the Goods and Services Tax Council?

The GST Council, established through the Constitutional (122nd Amendment) Act, 2016, recommends policies on Goods and Services Tax (GST) to the Union and State governments. It became functional after Presidential assent on September 8, 2016, ensuring cooperative federalism.

Source: TH