Understanding Wealth Tax in India 2025

Wealth accumulation and preservation are key concerns for high-net-worth individuals (HNWIs) in India. Until 2015, a Wealth Tax was levied on the net wealth of individuals, Hindu Undivided Families (HUFs) and companies exceeding a certain threshold. However, in the Union Budget 2015, Wealth Tax was abolished, leading to significant changes in financial planning strategies.

In this blog, we will explore the concept of wealth tax, its abolition and how life insurance can play a crucial role in effective wealth management.

What was Wealth Tax in India?

Just like an income tax is levied on income of individuals, wealth tax in India is the tax levied by the government on the inherited or earned wealth of companies, individuals and Hindu Undivided Families (HUF). It is charged on the value of assets such as land, buildings and cars etc.

The purpose of this tax was to reduce economic disparities in India and was charged at 1% of the net wealth. And individuals with an income over 1 crore and companies with an income over 10 crores fall under this.

Why Was Wealth Tax in India Abolished?

Wealth tax was abolished in the 2015 budget (effective FY 2015-16) and was replaced with a surcharge that ranges from 2-12% for the high-net worth section of the society.

The reason behind this abolition was that– cost benefit ratio was not feasible as only a limited section of society was aware of the provisions and obligations of wealth tax in India which resulted in many people not filing their wealth tax.

In order to simplify the wealth tax in India and boost revenue collection, the government of India replaced wealth tax in India with a surcharge.

Role of Life Insurance in Wealth Management

While wealth tax is no longer a direct concern for individuals in India, strategic financial planning remains essential. Leveraging life insurance as part of wealth management can help safeguard assets, optimise tax benefits and ensure a secure financial future for your loved ones. Here are a few ways life insurance can help:

1. Wealth Creation:Life insurance policies, particularly savings plans and ULIPs (Unit Linked Insurance Plans), offer a structured way to build wealth while ensuring financial protection. Kotak Life Insurance’s Savings Plans provide guaranteed returns, while ULIPs offer market-linked growth potential, helping individuals systematically grow their wealth. By combining financial security with investment opportunities, these plans make for an attractive choice for long-term wealth creation.

2. Tax-free proceeds: The maturity proceeds of a life insurance policy are tax-free, making it an attractive option for wealth creation.

3. Tax deductions: Premiums paid towards a life insurance policy are eligible for tax deductions under Section 80C of the Income Tax Act, 1961.

4. Legacy Planning: Life insurance is a powerful tool for safeguarding and growing one’s legacy while ensuring financial security for loved ones. With Kotak Life Term Insurance, you can protect what you are building and help your legacy thrive.

Final Thoughts

Wealth creation requires a multi pronged approach and doesn’t just involve acquiring assets and properties. Speak to our Kotak Life financial advisor or visit www.kotaklife.com today and streamline your plans to build wealth and save taxes.

Investing in Kotak Life’s - Kotak Life T.U.L.I.P, Kotak Life Guaranteed Fortune Builder or Kotak Assured Savings Plan can help you waive off a part of taxes while building long term sustainable wealth for your future.