This wealth tax was levied long time ago but the people who were sent the notices ten years ago lost the battle in Supreme Court in 2011 and after that IT dept increased the pace of such notices in Jallandhar.The central govt has levied wealth tax on urban lands to the tune of 1% of the market value of land in the entire country under wealth tax act, 1957. This wealth tax was levied long time ago but the people who were sent the notices ten years ago lost the battle in Supreme Court in 2011 and after that IT dept increased the pace of such notices in Jallandhar.
The primary reason of this being the widening of tax base and increase in tax collections. Under the income tax act, 1961 the urban land means any agriculture land within the 8 km of the municipal corporation limits and within 0km-2km of the municipal committees limits depending on class of committees.
There is tax exemption on wealth up to Rs 30 lack, while the rest is taxable at the rate of one per cent. Wealth tax is levied on unproductive assets, which includes urban land.
Ironically these lands are also covered under the capital gains tax in case of transfer of such land. The chief minister of Punjab and the president of PPCC has strongly opposed this central govt. move and are in talks with the central govt to withdraw the same as it will ruin these land owners. But the various factors listed below needs serious considerations at the state and central govt level:-
1) The central govt. opines that these urban lands are basically residential/commercial/industrial/institutional lands in the master plans of the respective cities and unproductive in nature and command high prices so these need to be taxed.
2) The market rates of these lands in Punjab vary from minimum Rs.50 lac per acre to Rs. 5 cr. per acre depending upon the city and the location, thanks to the illegal colonization. One percent of this will result in larger revenues.
3) These agricultural urban lands if put to lease generate Rs.30, 000 per annum to Rs.40, 000 per annum lease amount. So, the land owners are at serious loss and will have to pay from their pockets which will result in deep holes in their pockets.
4) This move will force to land owner to dispose his land to real estate builder and in some case distress sale will also occur.
5) With the state govt failing to make a policy to argue with these land owners to develop these lands as the non development of these lands are putting unnecessary burden on the existing infrastructure and leading in horizontal and haphazard expansion of cities, this step will help in curtailing this type of haphazard development.
6) More importantly with the deposit of wealth tax the IT dept will create a database of all these lands. Generally when these lands are transferred the land owners do not deposit the capital gains tax, if applicable resulting in loss of revenue.After the deposit of wealth tax it will be very easy for the dept to track the evasion of capital gains tax. If the capital gains tax is one of the areas of concern for the IT dept, then the central govt. should reduce the wealth tax to a level which is easily acceptable.
7)The wealth tax is levied on market value which is very difficult to assess as there is no state govt. agency to assess the market value of the land as the collector rate of these lands generally vary from 25% to 50% of the market value in Punjab.
Nirmal Singh Keerka ,
Gen Secretary, Punjab Heritage & Education Foundation.
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