Valuation of Assets as per the Wealth Tax Act

The value of an asset as per the Wealth Tax Act, other than cash, shall be its value as on the valuation date determined in the manner laid down in Schedule III.

Valuation of a building – Value of any building or land appurtenant thereto, or part thereof, is to be made in
accordance with Part B of Schedule III to the Wealth-tax Act

The first step is to find out gross maintainable rent. Gross maintainable rent is (a) annual rent received/receivable by the owner or annual value of the property as assessed by local authority, whichever is higher (if the property is let out) or (b) annual rent assessed by the local authority or if the property is situated outside the jurisdiction of a localauthority, the amount which the owner can reasonably be expected to receive as annual rent had such property been let (if the property is not let).

In the following cases “actual rent” shall be increased in the manner specified below :

(a) Taxes borne by tenant

(b) If property is rented, one-ninth of actual rent will be added, if expenditure on repairs in respect of the property is
borne by the tenant

(c) Interest @ 15% on deposit given by tenant or difference

(d) Premium received as consideration for leasing of the property or any modification of the terms of the lease will be divided over the number of years of the period of the lease and will be added to ‘actual rent’

(d) If the derives any benefit or perquisite as consideration for leasing of the property or any modification of the terms of the lease), the value of such benefit or perquisite shall be added to actual rent.

Net maintainable rent is determined by deducting from the gross maintainable rent

(a) the amount of taxes levied by any local authority in respect of property (deduction is available even if these are to be borne by the tenant) ; and
(b) A sum equal to 15% of gross maintainable rent.

The net maintainable rent is finally capitalized to arrive as value of net asset.. This can be done by multiplying the
net maintainable rent by 12.5. If the property is constructed on leasehold land, net maintainable rent is to be multiplied by 10 when the unexpired period of lease of such land is 50 years or more and multiplied by 8 where the unexpired period of lease of such land is less than 50 years).

If a property is acquired/constructed after March 31, 1974, then the value of the house property is determined as
above. Original cost of construction/acquisition plus cost of improvement of the house property is calculated. The
higher of the above is taken as capitalised value of net maintainable rent. This exception is applicable in respect one house property. The cost of acquisition/construction (plus cost of improvement) does not exceed Rs. 50 lakh, if the house is situated at Bombay, Calcutta, Delhi and Madras (` 25 lakh at any other place).

If unbuilt area of the plot of land on which the property is built exceeds the specified area, premium is to be added
to the capitalised value determined above.

Valuation of self-occupied property – If assessee owns a house (or a part of the house), being an independent residential unit and is used by the assessee exclusively for his residential purposes throughout 12 months ending on the valuation date, valuation will be as per provisions of section 7(2).

Assessee can either take value of the house as determined above on the valuation date relevant for the current
assessment year or he take value of the house, as determined above, on the first valuation date next following the
date on which he became the owner or the valuation relevant for the assessment year 1971-72, whichever is later. The choice is of the assessee. Where the house has been constructed by the assessee, he shall be deemed to have become the owner thereof on the date on which the construction of such house was completed.

Valuation of assets of business – If the assessee is carrying on a business for which accounts are maintained by him regularly, the net value of the assets of the business as a whole, having regard to the balance sheet of such business on the valuation date, is taken as value of such assets [Part D, Schedule III].

(A) The assets are valued as follows – Depreciable assets – Written down value, plus 20%, Non-depreciable assets (other than stock-in- trade) – Book value, plus 20%, Closing stock – Value adopted for the purpose of incometax, plus 20%.
(B) Then value of house property, life interest, jewellery and other assets is calculated as per other provisions of
Wealth Tax Act.
Higher of A or B is taken as value of assets.

Value of interest in firm or association of persons – The net wealth of the firm on the valuation date is  ascertained.

For determining the net wealth of the firm (or association), no account shall be taken of the exemptions given by
section 5. The portion of the net wealth as is equal to the amount of the capital of the firm or association is allocated amongst the partners or the members in the proportion in which capital has been contributed by them.
The residue of the net wealth is allocated amongst the partners or the members in accordance with the agreement of the partnership or association of persons for the distribution of assets in the event of dissolution of the firm or association or in the absence of such agreement, in the proportion in which the partners (or members) are entitled to share profits [Part E, Schedule III].

Value of life interest – The value of life interest of an assessee shall be determined as per Part F, Schedule III. Average net annual income of the assessee derived from the life interest during 3 years ending on the valuation date is calculated. While computing net annual income, expenses incurred on the collection of such income (maximum of 5% of the average of annual gross income) shall be deducted. This is multiplied as per formula prescribed to arrive at value of asset.

Valuation of jewellery – The value of jewellery shall be estimated to be the price which it would fetch if sold in the
open market on the valuation date (i.e., fair market value). Where the value of jewellery does not exceed Rs. 5,00,000, a statement in Form No. O-8A is to be submitted. Where the value of the jewellery exceeds Rs. 5,00,000, a report of a registered valuer in Form No. O-8 should be submitted. The report is not binding on assessing officer (Valuation Officer) and he can determine fair market value of jewellery.
The value of jewellery determined by the Valuation Officer for any assessment year shall be taken to be the value of such jewellery for the subsequent four assessment years subject to the prescribed adjustments.

Valuation of any other asset – The value of any asset, other than cash (being an asset which is not covered in above paras) shall be estimated either by the Assessing Officer himself or by the Valuation Officer if reference is made to him under section 16A. In both these cases, the value shall be estimated to be the price which it would fetch if sold in the open market, on the valuation date. If the asset is not saleable in the open market, the value shall be determined in accordance with guidelines or principles specified by the Board from time to time by general or special order.

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