Net wealth tax

Net Wealth Tax is a direct tax on the net worth of an individual, company, or entity. It is calculated on the total value of assets owned minus any liabilities owed.

Formula:

Net Wealth=Total Assets−Liabilities\text{Net Wealth} = \text{Total Assets} - \text{Liabilities}Net Wealth=Total Assets−LiabilitiesAssets Included:

1. Immovable property (land, buildings)
2. Cash, bank balances, financial securities
3. Valuable personal items (jewelry, vehicles, art)
4. Business ownership or stakes in companies

Liabilities Deducted:

1. Loans, mortgages, or other debts

Purpose:

1. Promote fair distribution of wealth
2. Generate revenue from high-net-worth individuals
3. Acts as a progressive tax, with higher net wealth paying more

Example:

An individual owns:

1. Land & property: ₹50,00,000
2. Bank deposits & investments: ₹10,00,000
3. Liabilities (loan/mortgage): ₹15,00,000

Net Wealth=50,00,000+10,00,000−15,00,000=45,00,000\text{Net Wealth} = 50,00,000 + 10,00,000 - 15,00,000 = 45,00,000Net Wealth=50,00,000+10,00,000−15,00,000=45,00,000The tax is applied to ₹45,00,000 at the applicable rate.