Can you expect reintroduction of an inheritance tax in the upcoming Budget? It is possible, say some experts. Abolished in 1985, an inheritance tax or estate tax is aimed to raise revenues from those who inherit wealth. Many analysts see this as a measure to tax the super rich in the country. At a time marked with shrinking tax collections and rising expenditure, an inheritance tax may help the government ease some of its fiscal deficit burden, according to analysts.
T Haque, Chairman of NITI Aayog’s Expert Committee on Land Issues, said that 1 per cent people control 58 per cent of the wealth in the country.
“An inheritance tax should be imposed on such people. There is a need to improve the tax-GDP ratio in the economy and inheritance tax will help in lowering the social inequality,” he added.
While the government has time and again favoured lower tax rates for the middle class, a moderate tax on the super rich might be a good way to increase the resources for the government, say experts.
One tax that analysts expect to make a comeback is the inheritance or estate tax, which was abolished in 1985.
“In today’s time, tax collection is digitised and streamlined. Data availability and information collation is not arduous. Circumvention of tax is certainly not easy. In terms of implementation, this tax can be better implemented and enforced now,” said Amish Tandon, partner, Innovatus Law Offices.
“There certainly exists scope for reintroduction of inheritance tax, but the approach must be a cautious one,” Mr Tandon added.
Factors such as threshold limits, tax slabs/rates, exemptions and limits and the prospect of gift tax must be taken into account for the reintroduction of inheritance tax, he explained.
This is not the first time that the debate on inheritance tax has cropped up. In 2012, the then Finance Minister P Chidambaram had indicated his desire of re-introducing inheritance tax. However, he stopped short of bringing in the legislation and merely levied higher surcharges on income of Rs 1 crore and upwards.
Inheritance tax is in practice in many countries across the world. In the US, an estate tax as high as 40 per cent of the total value of the inheritance is in effect.
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