The government is considering the levy of an inheritance tax on high net worth individuals, some of whom are already preparing to insulate themselves from such a liability by forming family trusts. The tax could range from 5% to 10% and would apply only to families with a certain net worth.
The government has sought feedback, including recommendations, on the proposed re-introduction of inheritance tax, also known as estate duty.
Also popularly known as estate tax or estate duty, Inheritance tax was a tax that was levied against a particular asset during the time of its inheritance. For example, the inheritance of ancestral land. Inheritance tax is no longer levied in India and was abolished during the time of the Rajiv Gandhi Government in 1985.
Though its intentions were noble, the then finance minister, V.P. Singh was of the opinion that it had failed to bring about an equilibrium in society and reduce the wealth gap. During its stay, inheritance tax or estate duty was levied from the period between 1953 and 1985.
There are certain countries that practice this form of taxation. Countries like USA, UK, Netherlands, Spain and Belgium all follow inheritance tax and China had gone to the extent of introducing rules for inheritance tax back in 2002 but was met with heavy opposition to the idea and were not able to implement it.