India’s Repealed Estate Duty and Controversies Surrounding Inheritance Tax
India once had an inheritance tax known as Estate Duty, which was introduced through the Estate Duty Act of 1953. The tax was calculated on the value of the inherited property at the time of the person’s death and was payable if the value exceeded a certain threshold. The objective of the tax was to narrow the income disparity in the country.
However, the Estate Duty faced several challenges, including poor implementation and loopholes in tax collection. These issues allowed people to avoid paying the tax, resulting in low revenue yield for the government. Additionally, the cost of administering the tax was relatively high.
In 1985, then-Finance Minister V.P. Singh proposed to abolish the Estate Duty, arguing that it had not achieved its intended objectives and that its repeal would simplify the tax system. The proposal was approved by Parliament, and the Estate Duty was abolished with effect from March 16, 1985.
Recent controversies surrounding inheritance tax in India have been sparked by comments made by Indian Overseas Congress chief Sam Pitroda. Mr. Pitroda cited the US inheritance tax as an example of a policy that should be considered in India. However, it is important to note that the US inheritance tax is a federal tax and only applies in six states. India does not currently have any federal inheritance tax.
Other countries, such as the United Kingdom, Japan, and South Korea, have inheritance tax systems with varying rates. In the United Kingdom, the inheritance tax rate is 40% on assets worth over 325,000 pounds. Japan has a high inheritance tax rate, with the current highest rate standing at 55%. South Korea boasts a 50% inheritance tax rate.
The debate over inheritance tax highlights the complex issues of wealth distribution and tax policy. While inheritance tax can be an effective tool for reducing wealth inequality, it also raises concerns about administrative costs and the potential impact on economic growth.
The decision of whether or not to implement inheritance tax in India is a complex one that requires careful consideration of all relevant factors.
