Inheritance Tax: It is often said that if you’re born into a rich family, if you have rich parents, then your life is ‘set.’ But just think, isn’t it a little unfair for the others? That you won’t have to do anything to inherit your parents’ wealth. You can use their connections and influence. Such Nepotism can be seen in almost all fields. Whether it is politics, business or Bollywood.
But how can it be eradicated? How can it be stopped? As a solution, some people suggest an Inheritance Tax. When you inherit your parents’ wealth, it should be taxed. This tax used to be levied in India once. But it is no more. Why is this? What can be its pros and cons? And in the other countries of the world, how is this inheritance tax levied? In today’s video, let’s understand this topic in depth.
The Inheritance Tax was much discussed before the 2019 Budget. The media had you believe that the Modi government would introduce the Inheritance Tax in the Budget. But it didn’t happen. But the concept of Inheritance Tax is not new to India. A similar tax was introduced in 1953. According to this law, if any person had any movable or immovable property to his name, that would have passed on to his children after his death, it would be subject to an Estate Duty. A kind of a Tax.
This was a progressive tax. Such that more value meant a higher tax rate. Similar to income tax. It began at 5%. And it went up to 40%. But there were several exemptions to this tax as well. For example, if you have a residential house whose value is less than ₹100,000, then you didn’t have to pay the inheritance tax, this Estate Duty. Or if the property was for Charitable purposes, or the money payout against insurance, or household goods, books or artwork, or clothes, these things did not attract Estate Duty. They were in the category of exemptions.
In the next few years, in the 1960s and 70s, the upper limit of the tax was increased. But in March 1985, the Indian Government completely abolished this tax. The Finance Minister of India at the time was V. P. Singh. And the Prime Minister was Rajiv Gandhi It begs the question, “Why was this tax abolished?” It is said that there were 3 main reasons for it.
First, the Government revenue from the inheritance tax was very low. Second, people found loopholes in the tax very easily. And would hide the inherited property illegally. People started hiding their assets. Third, it was a complicated law. Due to this, there used to be many court cases. And it proved to be a heavy expense for the government to fight the court cases or to deal with this tax administratively. Since the expense was high, this tax was abolished. Apart from this, there are 2 other taxes that are similar to inheritance tax. That were or are levied in India.
