THE WEALTH TAX ACT, 1957
COMPUTATION OF NET WEALTH
Particulars Rs.
Assets specified in Section 2(ea) chargeable in the hands of assessee on the basis of location
of the assets and the assessee's nationality and residential status
xxx
Less: Aggregate value of all the debts owed by the assessee on the valuation date incurred in
relation to the above said assets
(xxx)
Less: Assets exempt u/s 5 (xxx)
Add: Deemed asset in the assessee's hands u/s 4 xxx
Net Wealth as per Wealth Tax Act xxx
Rounding off Net Wealth [Section 44C]: The net wealth computed above shall be rounded off to
the nearest multiple of one hundred rupees.
1. ALtd is engaged in the construction of residential flats. For the valuation date 31.3.2008, it furnishes the
following data and requests you to compute the taxable wealth -
(a) Land in urban area (Construction is not permitted as per Municipal Laws in force) Rs.55,00,000
(b) Motor-cars (used on hire by the company) Rs.10,00,000
(c) Jewellery (Investment) Rs. 25,00,000. Loan taken for purchasing the same Rs. 20,00,000
(d) Cash Balance (as per books) Rs.2,75,000
(e) Bank Balances Rs.5,50,000
(f) Guest House (situated in a place which is 30 Kms away from the local limits of the municipality)
Rs.10,00,000
(g) Residential flats occupied by the Managing Director Rs.15,00,000. The Managing Director is on
whole time appointment and is drawing remuneration of Rs.2,00,000 per month.
(h) Residential house were let out on hire for 200 days Rs.10,00,000
The computation should be supported with proper reasoning for inclusion or exclusion.
Valuation Date: 31.03.2008 Computation of Taxable Wealth
Nature of asset Rs. Reason
Land in Urban Area NIL
Land in which construction is not permitted as per
municipal law is not an asset u/s 2(ea)
Motor Cars NIL Motor cars used in business of hire is not an asset u/s 2(ea)
Jewellery 25,00,000 Not held as stock in trade
Cash Balance NIL Cash as per books - Not an asset U/s 2(ea)
Bank Balance NIL Not an asset u/s 2(ea)
Guest House 10,00,000 Asset u/s 2(ea)
Residential Flat occupied by MD 15,00,000
Asset u/s 2(ea) since Annual Gross Salary is greater
than Rs.5,00,000.
Residential House Let-out 10,00,000 Asset U/s 2(ea) as it is not let-out for a period >300 days.
Total Assets
Less: Debt incurred in relation to
an asset: Loan for Jewellery
60,00,000
(20,00,000)
Taxable Net Wealth 40,00,000
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2. Samir furnishes the following particulars for the compilation of his Wealth Tax return for Assessment
Year 2008-09 -
(a) Gifts of jewellery made to wife from time to time aggregating Rs.80,000.Market value on valuation date
Rs.3,00,000
(b) Flat purchased under installment payment scheme in 1978 for Rs.9,50,000. Used for purposes of his
residence and market value as on 31.3.2008. (Installment remaining unpaid Rs. 80,000) Rs.10,00,000
(c) Urban land transferred to minor handicapped child valued on 31.3.2008 Rs.5,00,000.
Explain how you will deal with these items. Make suitable assumptions if required.
Particulars Taxable Reasons
Gift of Jewellery made to wife Rs.3,00,000 Deemed asset u/s 4. Fair Market Value of the Jewellery is taxable.
Flat used for residence NIL Taxable as an asset u/s 2(ea) but the assessee can claim
exemption u/s 5(vi). So full value of the asset is exempt from tax.
Urban Plot in the hands of the
minor
NIL Asset held by the minor who is handicapped u/s 80U, clubbing
provisions does not apply.
3. Compute the net wealth of Nivedita, a resident individual as on 31.3.2008 from the following
particulars furnished -
(a) She has a house property at Delhi, valued at Rs. 20,00,000 which is occupied by a firm in which she
is a partner for its business purposes. Another house at Mumbai, valued at Rs.8,00,000 is being
used for his own business.
(b) Vehicles for personal use - (i) Motor Car Rs.10,00,000 (ii) Motor Van - Rs.3,00,000 (iii) Jeep -
Rs.5,00,000.
(c) Cash on hand - Rs.3,10,000
(d) Jewellery - Rs.10,00,000
(e) Nivedita has gifted to a Trust a residential property situated at Kolkata purchased 5 years
back for Rs.20,00,000 for the benefit of the smaller HUF consisting of herself and her spouse and
let-out for 8 months. Schedule-Ill, Rule 3 value as on 31.3.2008 is Rs. 14 Lakhs.
(f) She had transferred an urban house plot in February 1997 in favour of her niece which was not
revocable during her life time. This niece died on 14.3.2007. Nivedita could get the title to
the plot retransferred to her name only on 15.4.2007 despite sincere and honest efforts. The
market value of the house as on 31.3.2008 is Rs. 10,00,000.
(g) Nivedita is the holder of an impartible estate in which urban agricultural lands of the value
of Rs. 4,30,000 as on 31.3.2008 are comprised.
Assessee: Ms. Nivedita Valuation Date: 31.3.2008 Assessment Year: 2008-09
Computation of Net Wealth
Nature of Asset
Amount
Taxable
Reasons
House Property at Delhi used for business
by a firm in which he is a partner
NIL
Property used for business purpose is not an asset u/s
2(ea) (Refer Note)
House Property at Mumbai used for his
own business
NIL
Property used for business purpose is not an asset u/s
2(ea)
Vehicles for Personal Use
1. Motor-car
2. Motor-van
3. Jeep
10,00,00
3,00,000
5,00,000
Vehicles used for personal purposes are asset u/s
2(ea)
Cash on Hand 2,60,000
For an Individual, cash in excess of Rs. 50,000 shall be
chargeable to Wealth Tax u/s 2(ea) (Rs.3,10,000 -
Rs.50,000)
Jewellery 10,00,000
Jewellery other than those held as stock-in-trade are
asset u/s 2(ea)
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Property at Kolkata transferred to a Trust
20,00,000
Less: Exemption u/s 5(vi) 20,00,000
NIL
Taxable u/s 4(1A). Value = Higher of Value as on
Valuation Date Rs.14 Lakhs or Cost of Acquisition Rs. 20
Lakhs
Urban House Plot transferred to Niece 10,00,000
Taxable u/s 4(5) as the title to the property stands
vested in Nivedita's hands immediately on niece's
demise
Urban Agricultural Land 4,30,000
Holder of an impartible estate is deemed to be the
owner of all properties comprised therein u/s 4(6)
NET WEALTH 44,90,000
4. SIPRA Constructions Ltd. is engaged in the construction of residential flats. For the valuation date
31.3.2008, furnishes the following data and requests you to compute the taxable wealth:
a) Land in urban area ( construction is not permitted as per Municipal laws in force) Rs.50 lakhs
b) Motor-cars (in the use of company) Rs.10lakhs
c) Jewellery (Investment) Rs.10 lakhs
d) Cash balance (As per books) Rs.3 lakhs
e) Bank Balance (As per books) Rs.6 lakhs
f) Guest House (Situated in rural area) Rs.8 lakhs
g) Residential flat occupied by Managing Director (Annual remuneration of whom is Rs.8 Lakhs excluding
perquisites) Rs.10 lakhs
h) Residential house let-out for 100 days in the financial year Rs.5 lakhs
(i) Loan obtained for:
• Purchase of Motor Car Rs. 3 lakhs
• Purchase of Jewellery Rs.2 lakhs
Assessee: SIPRA Constructions Ltd. Valuation Date: 31.3.2008 Assessment Year: 2008-09
Nature of Asset
Amt. taxable
(Rs. Lakhs)
Reasons
Land in Urban Area NIL
Land in which construction is not permitted as
per municipal laws is not an asset u/s 2(ea)
Motor-cars 10
Motor-car other than those used in the business of
hire or held as stock-in-trade is an asset u/s 2(ea)
Jewellery 10 Not held as stock-in-trade - asset u/s 2(ea)
Cash Balance NIL Cash as per books - not an asset u/s 2(ea)
Bank Balance NIL Not an asset u/s 2(ea)
Guest House 8 Asset u/s 2(ea)
Residential Flat Occupied by MD 10
Asset u/s 2(ea) - since Gross Annual Salary of
Managing Director is greater than Rs. 5 Lakhs
Let-out Residential House Property 5
Asset u/s 2(ea) - since not let-out for a
period exceeding 300 days
TOTAL ASSETS 43
Less: Debt incurred in relation to
Assets
1. Purchase of Motor-car
2. Purchase of Jewellery
(3)
(2)
NET WEALTH 38
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5. Sunrise Promoters & Developers Ltd. a widely held company owns the following assets as on 31.3.2008 -
(a) Land at Rajarhat (West Bengal) purchased in 2000 on which a residential complex consisting of 24 flats,
to be sold on ownership basis, is under construction for last 18 months
(b) Two office flats at Noida purchased for resale in the year 2001
(c) Shares of Group Companies, break-up value of which is Rs.19,00,000
(d) Cash at construction site Rs.8,00,000
(e) Residential flat in occupation of company's whole-time director drawing a salary of Rs.4,50,000
per annum.
Which of the above assets will be liable for wealth? Give reasons in brief
Assessee: Sunrise Promoters & Developers Ltd. Valuation Date: 31.3.2008 Assessment Year: 2008-09
Nature of Asset Amount
Taxable
Reasons
Land at Rajarhat purchased in
2004
NIL
Urban Land held as stock-in-trade for a period less than 10 Years -
not an asset u/s 2(ea)
Residential Flats at Noida
purchased in 2003 for resale
NIL House Property held as stock-in-trade - not an asset u/s 2(ea)
Shares of Group Companies NIL Not an asset u/s 2(ea)
Cash at construction site NIL Any amount recorded in the books of account is not an asset u/s 2(ea)
Residential House Property for
Whole-Time Director
NIL
Since Gross Annual Salary of Whole Time Director is less than Rs. 5
Lakhs - not an asset u/s 2(ea)
6. Hassan, a person of Indian origin was working in Australia since 1985. He returned to India for
permanent settlement in June 2002 when he remitted the moneys into India. He furnished the following
particulars of his wealth as on 31.3.2008. You are required to arrive at his wealth in respect of Assessment Year
2008-09-
(a) Market Value of Residential house in Jharkhand (let-out for residence) Rs.10,00,000 with Net
Maintainable Rent p.a. of Rs.1,20,000.
b) Share in building owned by a firm in which Hassan is a Partner - used for business Rs.5,00,000
c) Motor-car purchased in April 2007, out of moneys remitted to India from Australia Rs.4,00,000
d) Value of interest in Firm excluding item (b) above Rs.5,00,000
e) Shares in companies (quoted) Rs.2,00,000
f) Assets purchased out of amount remitted from Australia:
• Jewellery purchased in March 2000 Rs.5,50,000
• Vacant land purchased in October 1999 Rs.10,00,000
g) Amount standing to the credit of NRE Account Rs.15,00,000
h) Cash on hand (out of sale proceeds of agricultural income) Rs.65,000
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Assessee: Hassan Valuation Date: 31.3.2008 Computation of Net WeaIth
Nature of Asset Amount Reasons
Residential House in Jharkhand NIL Not an Asset u/s 2(ea) - Let-out for whole year -
Hence, not taxable
Share in the building owned by the firm NIL Not an asset u/s 2(ea), used for its own business -
not chargeable to tax
Motor-car 4,00,000
Less: Exempt u/s 5(v) - acquired out of money
brouqht into India (4,00,000)
NIL Asset u/s 2(ea). But, exemption available u/s 5(v),
since acquisition out of money brought into India.
Value of Interest in a Firm 5,00,000 Assumed as deemed asset u/s 4(1)(b)
Shares in Companies NIL Not an asset u/s 2(ea)
Value of Jewellery 5,50,000 Asset u/s 2(ea) - Not entitled for exemption
Vacant Land 10,00,000 Asset u/s 2(ea) - Purchased in October 1999
Money in NRE A/c NIL Not an asset u/s 2(ea)
Cash in Hand in excess of Rs.50,000 15,000 Asset u/s 2(ea), being an Individual
NET WEALTH 20,65,000
7. Romit Roy, a Not Ordinarily Resident in India seeks your advice with regard to the furnishing of his Wealth Tax
Return. The value of assets held on 31.3.2008 is indicated below. You are requested to compute the Taxable Wealth.
• Motor cars of foreign make held as Fixed Assets Rs.26 lakhs
• Gold bonds under Gold Deposit Scheme, 1999 Rs.25 lakhs
• Residential House Property at Kolkata let out w.e.f.10.2.2007 Rs.30 lakhs
• Jewellery held Rs.20 lakhs
• Lands purchased for industrial purpose: (a) on 1.1.2002 Rs. 7 lakhs (b)on 24.2.2007 Rs.10 lakhs
• Loans against the purchase of land : (a) on 1.1.2002 Rs. 4 lakhs (b) on 24.2.2007 Rs.5 lakhs
• Fixed Assets located in Abu Dhabi Rs.80 lakhs
• Cash at Bank Rs.4 lakhs
• Cash in Hand Rs.80,000
• Mrs. Roy acquired out of gifts received from her husband:
(a) Shares and securities Rs.3,00,000
(b) Residential House property at Bangalore Rs.20,00,000
Assessee: Romit Roy Valuation Date:31.3.2008 Assessment Year:2008-09
Computation of Net Wealth
Nature of Asset Rs. Reasons
Motor-cars 26,00,000 Motor-car other than those used in the business of
horir eh e ld as stock-in-trade is an asset u/s 2(ea)
Gold Bonds, 1999 Nil Not an asset under WT Act.
Residential House Property Nil Any residential house property let-out for 300
days or more is not an asset
Jewellery 20,00,000 Jewellery other than those held as stock-in-trade
is an asset
Land purchased on 1.1.02 for Industrial Purpose 7,00,000 Land held beyond two years from the
adcaqteu i soitfi o n for industrial purposes is an asset
Land purchased 24.2.2007 Nil Land held for first two years from the date
aocf q uisition for industrial purposes is not an asset
Cash-on-Hand 30,000 Cash held beyond Rs. 50,000 is an asset
Cash-at-Bank Nil Not an asset under WT Act.
Fixed Asset located in Abu Dhabi Nil Not chargeable to tax for Not Ordinary Resident
Deemed Assets acquired and held by Mrs.Roy
(a) Shares and Securities Nil Not an asset u/s 2(ea)
(b) Res.House Property at Bangalore 20,00,000 Asset u/s 2(ea).
Less: Exemption u/s 5(vi) (20,00,000) Nil One house or part of the house exempt u/s 5(vi)
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Total Assets 53,30,000
Less: Debts incurred on Taxable Assets Wealth Tax Liability and Debts incurred in
reexleamtiopnte dto a ssets are not deductible
On Land acquired on 1.1.2002 (4,00,000)
Net Wealth 49,30,000
Less: Basic Exemption 15,00,000
Taxable Net Wealth 34,30,000
Tax Payable @ 1% 34,300
VALUATION OF IMMOVABLE PROPERTY
8. Abhishek, a person of Indian origin was working in Austria since 1990. He returned to India for permanent
settlement in May 2007 when he remitted money into India. For the valuation date 31.3.2008, the following particulars
were furnished. You are required to compute the taxable wealth. The reason for inclusion or exclusion should be stated –
• Building owned and let-out for 270 days for residence. Net maintainable rent (Rs.1,00,000) and the Market Value
(Excess of Unbuilt Area over Specified Area is 20% of the Aggregate Area) Rs. 30 lakhs
• Jewellery: (a) Purchased in April 2007 out of money remitted to India from Austria Rs.12,00,000
(b) Purchased in May 2007 out of sale proceeds of motor-car brought from abroad and sold for Rs.40 lakhs.
• Value of interest in urban land held by a firm in which he is a partner Rs.10 lakhs
• Bonds held in companies Rs.10 lakhs
• Motor car used for own business Rs.25 lakhs
• Vacant house plot of 480 sq.mts. (purchased in December 2000) market value of Rs.20,00,000
• Cash in hand Rs.45,000
• Urban land purchased in the year 2005 out of withdrawals of NRE Account Rs.15,00,000
Assessee: Abhishek Valuation Date: 31.3.2008 Assessment Year: 2008-09
Computation of Net Wealth
Rs Rs Reasons
Value of the House
18,50,000 18,50,000 Asset u/s 2(ea). Working Note 1
Jewellery: Purchased in April 2007
Less: Exempt u/s 5(v) Jewellery
12,00,000
(12,00,000)
Nil Asset u/s 2(ea)
Purchased out of money brought into
India
Jewellery: Purchased in May 2007
Less: Exempt u/s 5(v)
40,00,000
(40,00,000)
Nil Asset u/s 2(ea)
Purchased out of sale proceeds of
assets brought into India
Interest in Urban Land held by firm 10,00,000 10,00,000 Deemed Asset u/s 4(1)(b)
Bonds held in companies ------------ Nil Not an asset u/s 2(ea)
Motor car 25,00,000 Asset u/s 2(ea). Not held as stock-intrade
Vacant House Plot ( 480 sq. mts.)
Less: Exempt u/s 5(vi)
20,00,000
(20,00,000)
Nil Asset u/s 2(ea)
House/part of house/plot less than
500 sq.mts.
Cash in hand Nil Since not exceeding Rs.50,000
Urban Land Purchased
Less: Exempt u/s 5(v)
15,00,000
(15,00,000)
Nil Purchased out of money brought into
India
NET WEALTH 53,50,000
(1)Working Notes: Valuation of Building:
Net Maintainable Rent(NMR) = Rs.1,00,000
Capitalized Value of NMR = NMR x 12.5 (Owner of the land) = Rs. 1,00,000 x 12.5 = Rs.12,50,000
Add: Premium for excess of unbuilt area (20%) over specified area = 40% of CNMR = Rs. 5,00,000
VALUE OF THE HOUSE Rs.18,50,000
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9. Mr. Kushal Sengupta owns a house at Jharkhand, which is let-out at Rs.1,35,000 per annum. The annual
value of the property as per municipal records also is Rs.1,00,000. Municipal taxes are partly borne by the
owner (Rs.5,000) and partly by the tenant (Rs.6,000). Repair expenses are borne by tenant (Rs10,000) the
difference between the un-built area and specified area does not exceed 5%. The property was acquired on
10.5.1997 for Rs. 15,00,000.
Determine for purposes of Wealth Tax Act, the value of the property as on 31.3.2008 on the following situations -
(a) The house is built on a freehold land.
(b) It is built on a leasehold land, the unexpired period of lease of the land is more than 50 years.
(c) If the area of the plot on which the house is built is 800 sq. meters. FSI, permissible is 1.4 and FSI utilised is
1088 Sq. metres. (136 Sq. metres x 8 Storeys)
(d) The tenant had made interest free deposit of Rs. 1,00,000 with the landlord.
Assessee: Mr. Kushal Sengupta Valuation Date: 31.3.2008 Assessment Year: 2008-09
Computation of Value of House Property
For Situations (a) & (b):
Computation of Gross Maintainable Rent (Amount in Rs.)
Particulars
.
No Rental
Deposit
Rental Deposit
excess of 3 Mths
Actual Annual Rent
Add: Municipal Taxes borne by the tenant
l/9th of Actual Rent Receivable since repair expenses are borne by the tenant
(Rs.1,35,000/ 9)
Rental Deposits - 15% Interest on Rs. 1,00,000
1,35,000
6,000
15,000
Nil
1,35,000
6,000
15,000
15,000
1,56,000
11,000
23,400
1,71,000
11,000
25,650
1,90,400 2,07,650
23,80,000 25,95,625
19,04,000 20,07,650
GROSS MAINTAINABLE RENT
Less: Municipal Taxes Paid
Less: 15% of Gross Maintainable Rent
Net Maintainable Rent
Case (a) Capitalization of Net Maintainable Rent
-Freehold Land NMR x 12.5
Case (b) Capitalization of Net Maintainable Rent
-Leasehold Land - Unexpired Lease 50 Years = NMR x 10
Property Acquired after 31.3.1974 i.e. 10.5.1997
15,00,000
15,00,000
Therefore, Value of the Property (whether on Lease-hold Land or on
Freehold Land)
15,00,000 15,00,000
For Situation (c ): In case of excess unbuilt area:
Unbuilt Area = (Actual Area of the Land less Built up Area) = (800 sq. mt less 136 sq. mt). = 664 sq. mt.
Excess Unbuilt Area = (Unbuilt Area less Specified Area) = 664 sq. mt. less 70% of 800 sq. mt.
= 664 Less 560 = 104 sq. mt
% of Excess Unbuilt Area = Excess Unbuilt Area x 100 / Aggregate Area = 104 x 100 / 800 = 13%
Therefore, Value of the Property = Substituted Net Maintainable Rent i.e. Rs.15,00,000 + 30%
of SNMR = Rs. 19,50,000
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10. From the following dated furnished by Mr.Soumitra, determine the value of house property built
on leasehold land as at the valuation date 31.3.2008:
Particulars Rs.
Annual Value as per Municipal valuation
1,40,000
Rent received from tenant (Property vacant for 3 months during the year)
1,08,000
Municipal tax paid by tenant
10,000
Repairs on property borne by tenant
8,000
Refundable deposit collected from tenant as security deposit which does not carry any
interest
50,000
The difference between unbuilt area and specified area over aggregate area is 10.5%.
Assessee: Mr. Soumitra Valuation Date: 31.3.2008 Assessment Year: 2008-09
Computation of Value of House Property
Step I: Computation of Gross Maintainable Rent(GMR)
Particulars Rs. Rs.
Actual Annual Rent- Rs. 1,08,000 x 12 Months / 9 Months 1,44,000
Add: Municipal tax paid by the Tenant 10,000
l/9th of Actual Rent Receivable as repair expenses are borne by the tenant - Rs.
1,44,000/9
16,000
Interest on Refundable Security Deposit- Rs. 50,000 x 15% x 9/12 6,000 32,000
GROSS MAINTAINABLE RENT (GMR) 1,76,000
Step II: Computation of Net Maintainable Rent (NMR)
Particulars RS. Rs.
Gross Maintainable Rent (GMR) 1,76,000
Less: Municipal Taxes levied by the local authority 10,000
15% of Gross Maintainable Rent - Rs.1,76,000 x 15% 26,400 (36,400)
NET MAINTAINABLE RENT (NMR) 1,39,600
Step III: Capitalisation of the Net Maintainable Rent (CNMR) (Assumed that unexpired lease period is more than 50
Years)
NMR x Multiple Factor for an Unexpired Lease Period - Rs. 1,39,600 x 10 = Rs. 13,96,000
Step IV: Addition of Premium to SNMR in case of excess inbuilt area:
Particulars Rs.
Add:
Capitalisation of the Net Maintainable Asset
Premium for excess of 10.5% unbuilt area over specified area -30% of CNMR
13,96,000
4,18,800
Value of House Property as per Wealth Tax Act 18,14,800
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11. Property Company Ltd. has let-out a premise with effect from 1.10.2006 on monthly rent of Rs.1.5 lakh. The lease is
valid for 10 years and the tenant has made a deposit equivalent to 3 months rent. The tenant has undertaken to pay the
municipal taxes of the premises amounting to Rs. 2 lakh. What will be the value of the property under Schedule III of the Wealth
Tax Act for assessment to wealth tax?
Assessee: Property Company Ltd. Valuation Date: 31.3.2008 Assessment Year: 2008-09
Computation of Value of Let-out Property
Actual Annual Rent Receivable - Rs. 1,50,000 x 12 Months
Add: Municipal Taxes borne by the Tenant
GROSS MAINTAINABLE RENT
Less: Municipal Taxes levied by the Municipal Authority
Less: 15% of Gross Maintainable Rent (Rs. 20,00,000 x 15%)
NET MAINTAINABLE RENT
18,00,000
2,00,000
20,00,000
2,00,000
3,00,000
15,00,000
Value of the Property = Capitalized Value of NMR
NMR x 8 (unexpired period of lease is less than 50 years) = Rs. 15,00,000 x 8= Rs.1,20,00,000
Valuation of Partner's Interest in Firm
12. Net wealth of firm consisting of three partners Bidyut, Kingshuk and Deepak in 2:2:1 and a capital contribution of
Rs.17 Lakhs, Rs.13 Lakhs, and Rs.12 Lakhs respectively is as under -
(a) Value of assets located outside India Rs.30,00,000
(b) Value of assets located in India Rs.80,00,000
(c) Debts incurred in relation to assets in India Rs. 40,00,000
Determine the value of interest of the partners in the firm under the Wealth Tax Act, 1957.
Assesses: Bidyut, Kingshuk & Deepak Valuation Date: 31.3.2008 Assessment Year: 2008-09
Computation of net wealth of the Firm
Particulars Rs. Rs.
Value of Assets located in India
Less: Liability in relation to assets in India
Value of Assets located outside India
80,00,000
40,00,000
40,00,000
30,00,000
Net Wealth of the Firm 70,00,000
Computation of Interest of the Partner in the net wealth of the Firm (Amount in Rs.)
Particulars Bidyut Kingshuk Deepak
To the extent of Capital Contribution
Balance (Net Wealth - Capital Contribution) in Profit sharing ratio
since dissolution ratio is not given
17,00,000
11,20,000
13,00,000
11,20,000
12,00,000
5,60,000
Interest of the Partner in the Net Wealth of the Firm 28,20,000 24,20,000 17,60,000
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Computation of the Interest of the Partner in the net wealth of the Firm on the basis of location of
assets: (Interest of the Partner in the Firm apportioned in the ratio of 4:3)
Particulars Balu Kausik Deepu
Assets Located Inside India
Assets Located Outside India
16,11,429
12,08,571
13,82,857
10,37,143
10,05,714
7,54,286
Interest of the Partner in the Net Wealth of the Firm 28,20,000 24,20,000 17,60,000
Valuation of Life Interest
13. Satender is aged 35 years. His father settled a property in trust giving whole life interest therein to
Satender. The income from the property for the years 2004-05 to 2007-08 was Rs.70,000,
Rs.84,000, Rs.90,000, Rs.108,000, respectively. The expenses incurred each year were Rs.2,000,
Rs.4,000, Rs.5,000 and Rs.6,000 respectively. Calculate the value of life interest of Mr.Jogi in the
property so settled on the valuation date 31.3.2008, with the help of the factor of 9.267.
Step Procedure
1 Average Income for last three years = (Rs.84,000 + Rs.90,000 + Rs.1,08,000) / 3 = Rs.94,000.
2 Average Expenses for the last three years = (Rs.4,000 + Rs.5,000 + Rs.6,000) / 3 = Rs.5,000.
3 Maximum Permissible Expenses = Average Expenses or 5% of Average Income, whichever is less
= 5%of Rs.70,000 = Rs.3,500
4 Average Annual Income = Rs.94,000 Less Rs.3,500 = Rs.90,500.
5 Life Interest = Average Annual Income x Life Interest Factor = Rs.90,500 x 9.267 = Rs.8,38,664.
14. 'X' received a vacant site under his father's will. The value of the site on 31.3.2008 is Rs.15 Lakhs. As
per terms of the 'Will' in the event 'X' wants to sell the site he should offer it to his brother for sale
at Rs.10 Lakhs. 'X', therefore, claims that the value of the site should be taken at Rs.10 Lakhs as at
31.3.2008. Is the claim correct?
Answer:
1. As per Rule 21 of Schedule III to the Act, the price or other consideration for which any property
may be acquired by or transferred to any person under the terms of a deed of trust or
through or under any restrictive agreement in any instrument of transfer shall be ignored for
the purpose of determining the value under the provisions of the Schedule.
2. In view of the above, the value of the site should be taken as Rs. 15 Lakhs and not as Rs. 10 Lakhs.
3. Therefore, claim of X is incorrect.
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