1. Wealth Tax: Abolished Since April 2016
India abolished the Wealth Tax Act, 1957 from Assessment Year 2016-17 (Finance Act 2015). There is currently no wealth tax in India — individuals, HUFs, and companies do not pay any annual tax on net wealth. This was replaced by additional surcharge on high-income taxpayers. The abolition removed the compliance burden of valuing assets annually and filing a separate wealth tax return.
2. What Existed: Wealth Tax Basics
For historical understanding: under the Wealth Tax Act, taxpayers with net wealth exceeding Rs 30 lakh had to pay 1% tax annually on the excess. Wealth included: residential property beyond one, motor vehicles, jewellery, archaeological collections, aircraft, yachts, cash above Rs 50,000, and urban land. Agricultural land, commercial property used for business, and one residential property were excluded.
3. Schedule AL: Asset and Liability Disclosure
While wealth tax is abolished, high-income taxpayers must still disclose assets and liabilities in Schedule AL (Assets and Liabilities) of the ITR:
- Applicable to: taxpayers with income above Rs 50 lakh in the Tax Year
- Schedule AL requires: immovable property (land and building), movable assets (vehicles, jewellery, bullion, art), financial assets (deposits, shares, mutual funds, insurance, loans and advances), and liabilities
- Purpose: transparency and detecting unexplained wealth
- The AO uses Schedule AL data to assess whether the taxpayer lifestyle and asset accumulation is consistent with declared income
4. What Must Be Disclosed in Schedule AL
| Asset Category | Details Required |
|---|---|
| Immovable property | Address, PAN of co-owner (if joint), cost of acquisition |
| Financial assets (deposits) | Name of bank, amount |
| Financial assets (shares/MF) | Company/fund name, units/quantity, cost |
| Cash | Cash in hand above normal |
| Jewellery/bullion | Value |
| Vehicles | Make, model, year |
| Liabilities | Home loan, personal loan, credit card outstanding |
5. Schedule FA: Foreign Asset Disclosure
Separately, resident taxpayers must disclose all foreign assets in Schedule FA (regardless of income level). Foreign assets include: foreign bank accounts, foreign equity investments, foreign property, foreign trusts. This is a comprehensive annual disclosure obligation under the Black Money Act framework — non-disclosure attracts Rs 10 lakh penalty per asset per year.
6. Benami Property: Effective Substitute for Wealth Tax
While formal wealth tax is abolished, the Prohibition of Benami Property Transactions Act, 1988 (amended 2016) provides an effective mechanism to identify unexplained wealth held in others names. Benami transactions (holding property in another person name while beneficial interest remains with the actual owner) attract confiscation and prosecution under this act. This complements AIS and Schedule AL disclosures to identify undisclosed wealth.
7. Black Money Act: For Undisclosed Foreign Wealth
For foreign wealth, the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 effectively acts as a special regime for foreign wealth: undisclosed foreign assets taxed at 30% of asset value, with 300% penalty. Annual Schedule FA disclosure is mandatory for all ordinarily resident taxpayers. The combination of FATCA/CRS automatic exchange and Schedule FA creates comprehensive coverage.
8. High Value Transaction Monitoring
The SFT (Statement of Financial Transactions) regime requires banks, registrars, stock exchanges, and mutual funds to report high-value transactions to the IT Department. These appear in the taxpayer AIS and are compared with income/wealth declared. SFT-reported transactions include: property purchases above Rs 30L, FD above Rs 10L, credit card payments above Rs 10L, cash deposits above Rs 10L, and share purchases above Rs 10L.
9. Why TaxClue
While wealth tax is gone, Schedule AL and Schedule FA disclosures create significant compliance obligations for high-income taxpayers and those with foreign assets. TaxClue ensures accurate and complete Schedule AL and FA reporting. Contact us under ITA 2025.