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Posted 26 Apr 2024

2 min read

  • The use of inheritance tax to address economic inequality is widely debated in India. 
  • Inheritance tax is levied on property inherited upon an individual's death
    • It differs from estate tax, which is levied on the total value of a deceased person's estate.
    • It is levied by many countries. E.g.  Japan (tax rate is 55%), South Korea (tax rate is 50%) etc. 
  • In India, currently there is no inheritance tax
    • Earlier, estate duty was imposed in 1953.
      • The tax rate reached up to 85%, making it highly unpopular. Thus, it was abolished in 1985.
    • Similar to Estate duty, gift tax and wealth tax were imposed in India.
    •  These were abolished in 1998 and 2015 respectively. However, gift tax was introduced in 2004. 

 

  • Pros and cons of Inheritance Tax 

Specifications

Pros

Cons

Revenue Generation
  • It may lead to an increase in revenue generation for the government. 
  • Due to the high taxation rate, loopholes such as tax evasion and avoidance can be used.
  • Also, it may lead to distress sales for depositing taxes.
Wealth Distribution
  • It may reduce wealth inequality. It will promote equality  of opportunity
  • It will discourage individuals from working hard. 
  • It may amount to double taxation as assets inherited might have been already taxed.
  • Tags :
  • Inheritance Tax
  • Redistribution of Wealth
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