Inheritance Tax:

Home   »  Inheritance Tax:

April 25, 2024

Inheritance Tax:

Why in News?  The use of inheritance tax as a tool for redistribution of wealth to address income inequality has been discussed widely. India did have an inheritance (or death) tax once.

The tax, which was known as estate duty, was introduced in 1953, and was abolished in 1985 by the government of Rajiv Gandhi.

India also had a wealth tax and a gift tax, which were abolished in 2015 and 1998 respectively.

History of Inheritance Tax in India:

  • It was introduced in 1953 under the Estate Duty Act, 1953 as an attempt to reduce economic disparity.
  • After independence, India did not have a uniform inheritance tax across the entire country. However, in 1953, the Central Government introduced the Estate Duty Act, which imposed taxes on the value of property transferred by inheritance or gift. This act was aimed at taxing the transfer of property and assets from one generation to another.

Abolition: The Estate Duty Act was repealed in 1985 by the government of Prime Minister Rajiv Gandhi. The rationale behind this decision was to simplify the tax structure and reduce the compliance burden. Additionally, there were concerns about the effectiveness and enforcement challenges of the estate duty.

Current Scenario: As of now, there is no specific inheritance tax in India at the national level. However, certain states in India have introduced their own versions of inheritance tax or estate duty. For example, Kerala proposed a “wealth tax” on large inheritances in 2019, although the implementation and effectiveness of such state-level measures can vary.

Why these taxes were abolished?

  • Wealthy taxpayers are seen as being sensitive to high rates of taxation, which often results in flight of capital and investment to tax havens or tax jurisdictions with favourable tax rates.
  • In the initial years of estate duty, collections were lower than the budgeted estimates.
  • The high cost of collection and double taxation in various forms of wealth tax were cited as reasons for abolishing estate duty.
  • Wealth tax before death and estate duty after death — amounted to “procedural harassment” of taxpayers.

What are the view of other countries/organization ?

  • The (IMF) has said tax rates on wealth have generally declined around the world over the past decades, with a decline in average corporate income tax rates being an important component across country groups of all income levels.
  • 12 OECD members had wealth taxes in 1990, but only three (Switzerland, Spain, Norway) now levy a broad-based wealth tax.
  • As per  the Global Tax Evasion Report 2024 , A global minimum tax on billionaires, equal to 2% of their wealth, could potentially raise close to $250 billion from fewer than 3,000 individuals annually
Difference in Wealth Tax & Estate tax:

Wealth Tax:

A wealth tax is levied on the overall value of an individual’s assets, including cash, investments, real estate, and personal property.

·         It is typically an annual tax, calculated as a percentage of the individual’s net worth.

·         The tax is based on the total value of assets owned by the individual, regardless of whether those assets generate income or not.

Estate Tax (Estate Duty):

·         Estate tax is a tax imposed on the transfer of an individual’s assets upon their death.

·         It is based on the total value of the assets transferred from the deceased person’s estate to their beneficiaries.

·         The tax is usually levied before the assets are distributed to heirs or beneficiaries.


Get In Touch

B-36, Sector-C, Aliganj – Near Aliganj, Post Office Lucknow – 226024 (U.P.) India

+91 8858209990, +91 9415011892


Subscribe now for latest updates.

Follow Us

© All Rights Reserved.

Inheritance Tax: | Vaid ICS Institute