Following Sam Pitroda called the Inheritance Act in the United States of America an “interesting law” and this comment of his has sparked debate amongst observers, it seems all the more evident as to what this law is and why it has sparked controversy.
WHAT IS THE LAW
An Inheritance Tax, as its name implies, is a tax imposed on the assets inherited from a deceased individual. In simpler terms, it means that when someone inherits assets from a deceased person, they are required to pay a tax on those inherited assets. This tax is calculated based on the total value of the inherited assets and is typically payable by the beneficiaries who receive them. In essence, when someone inherits assets from a deceased person, they may be required to remit a portion of the value of those assets to the government as tax. This tax is distinct from other forms of taxation, such as income tax or property tax, as it specifically targets the transfer of wealth from one generation to another. The rates and thresholds for Inheritance Tax vary depending on the jurisdiction and the value of the estate being transferred.
INDIA’S POSITION ON INHERITANCE TAX
India did indeed have legislation on Inheritance Tax as far back as 1953. It was characterized as a progressive taxation system, wherein property transfers below a specified threshold were granted exemption, and those which met the criteria were taxed and the highest tax rate reached up to 85%.
This tax was part of the Estate Duty Act of 1953 and was introduced with the aim of reducing economic inequality. The government noticed significant wealth disparity in the country and implemented this tax as a measure to address it.
In 1985, the government made the decision to repeal the Inheritance Tax. The reason to repeal the law were cited by the then Finance Minister Vishwanath Pratap Singh, who in his budget speech said that that it had failed to achieve the dual objectives of ameliorating the unequal distribution of wealth and aiding the states in funding development schemes.
In summary, India once had an Inheritance Tax, but it was repealed in 1985 due to perceived inefficiency in reducing economic inequality and minimal impact on government revenue. Currently, India does not have an Inheritance Tax in place.
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