Inheritance tax is a tax paid by a person who inherits money or property of a deceased person, depending on the value of the inherited estate(property/assets) and the relationship to the deceased.Imemdiate family members may pay less and others may pay more,depending on the country.
2. What is the difference between estate duty/tax and inheritance tax?
An estate tax is levied on the entire estate before it is distributed to the heirs, whereas an inheritance tax is paid by the heirs on the property they receive.Estate duty is paid by the earner of the estate(assets) before death. Inheritance tax is paid by the inheritors, the beneficiaries. They are different as far as the amount on which the tax is paid and the persons who pay.
3. Is it not double taxation?
No. it is not. The amount and the persons who pay are different.
4. Does India currently have an inheritance tax?
No, India does not currently have an inheritance tax. The Estate Duty Act was imposed in 1953 at rates ranging from 10%-85%. It was abolished in 1985 due to the fact that it was administratively difficult to implement,complex and cumbersome and was lost in litigation.
5. Is it a type of gift tax?
Yes. But in India gift tax under the Income Tax Act exempts inheritance and gift money received during weddings.
6. What are the implications for heirs in India receiving an inheritance?
In India, heirs do not pay any inheritance tax. The primary tax responsibility for heirs involves income tax, which may be applicable if the inherited assets generate income, or capital gains tax ,if the assets are sold.
7. Are there any discussions about reintroducing the inheritance tax in India?
Yes, there have been discussions and speculations, especially around budget times, about the potential reintroduction of the inheritance tax to address wealth inequality.
8. How do inheritance taxes work in other countries?
Inheritance tax regimes vary globally. For instance, the United States has an estate tax at the federal level and an inheritance tax in some states. European countries like the UK and France have significant inheritance taxes, especially targeting larger estates and non-direct family members like nominees.
9. How do inheritance taxes affect wealth distribution?
Inheritance taxes are considered a tool for wealth redistribution, aiming to reduce wealth concentration among the affluent, thus supporting social equity and funding public services.
10. Are there exemptions in inheritance taxes?
Many countries provide exemptions in inheritance taxes based on the relationship between the deceased and the beneficiary, and the value of the inheritance. Exemptions and rates can significantly vary from one country to another.
11. How are assets valued for inheritance taxes?
Assets are generally valued based on their fair market value at the time of the deceased’s death. This valuation includes all tangible and intangible assets like cash, property, investments, and other belongings.
What are the proponents of inheritance tax saying?
● The growing inequality is not conducive for economic growth and political stability.
● Inheritance tax will enable some redistribution of the wealth whereby the state can use it in the larger interests of the deprived.
● Inheritors of huge wealth continue to live opulent lives for no merit of theirs
● The constitution of India affirms the right to equality(Art.38), which justifies the imposition of this tax.
● Indirect taxes, which are borne by the middle and lower-middle-income segments of society can be reduced.
● If the government of India revives this particular tax, the less privileged sections of Indian society will be given some relief from tax liabilities.
● Direct taxes like inheritance can bring about more investment in human development.
● When the tax proceeds are shared with states, it will reduce horizontal fiscal imbalances.
And the opponents say:
● It’s property on which taxes have been paid
● It’s the work of the whole family and there is no idle inheritance
● It works as a disincentive
● Money can find its way to tax havens and crypto assets,
12.What is its constitutionality in India?
In the Union List,Entry 82 deals with the income tax. Gift tax,corporate tax,inheritance tax,estate tax,wealth tax and so on are all forms of income tax. It is imposed by the Union Government and shared with states via the Finance Commission recommendations.
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