The Union Budget 2009/10 has proposed an increase in the exemption limit for wealth tax to Rs 30 lakh, from the earlier Rs 15 lakh.
The proposed change will be applicable on net worth as on March 31, 2010.
The current limit of Rs 15 lakh, which was fixed in 1992, is applicable on individuals, HUFs and companies.
The change has been proposed considering the prevalent inflation conditions. It is expected that the limit may be further raised considering the same.
Presently, the Consumer Price Index, used for tax calculations is around 10 percent, whereas WPI hovers around (-)1.14 percent.
In 1992, when wealth tax came into existence, CPI was 199. It increased to 582 in 2008-09. The compounded annualised growth (CAG) of CPI is 6.5 percent for last 17 years.
The wealth tax collections for previous fiscal are estimated to less than Rs 500 crore.
Wealth tax is levied only in few countries, including India. In India, only 5 percent of the total taxpayers come under the purview of wealth tax. Most wealth taxpayers in India are either wealthy corporate houses or high net worth (HNI) individuals. The country has nearly 80,000 HNIs with wealth amounting $1 million or more.
With increase in limit for wealth tax, the number of taxpayers under its purview will further reduce. In time to come, this tax may be completely scraped, similar to the step taken for FBT by Government in this year' budget.