INHERITANCE TAX
After Sam Pitroda described the inheritance tax in the United States as an “interesting law”, Prime Minister Narendra Modi alleged that the Congress would snatch property left behind by people for their children.
DID INDIA HAVE SUCH A LAW IN THE PAST?
The use of inheritance tax as a tool for redistribution of wealth to address income inequality has been discussed widely. India did have an inheritance (or death) tax once. The tax, which was known as estate duty, was introduced in 1953, and was abolished in 1985 by the government of Rajiv Gandhi.
WAYS OF TAXATION
- Taxes are levied on the flow of income on wealth or at the time of transfer of wealth or on the stock of wealth linked to the value of owned assets as a one-time levy.
- There can be a capital levy on income from wealth or ownership of assets resulting in capital gains, transfer taxes in the form of wealth tax, inheritance tax, estate tax, or gift tax at the time of transfer of wealth or assets.
- Taxes can also be levied on a combination of income and wealth.
INHERITANCE TAX IN INDIA
- The now abolished estate duty was inheritance tax with a threshold of Rs. 1 lakh,
and progressive rates from 5% to 40% on the principal value of the estate exceeding Rs. 20 lakh. - The Estate Duty Act, 1953 was amended in 1958 to change the definition of accountable person, lower the applicable threshold, and redefine slabs.
- It was abolished in 1985.
- Even after its abolition, the idea of inheritance tax remained alive and was part of official and unofficial discussions.
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