Pitroda’s remarks put spotlight on inheritance tax decades after it was scrapped

The inheritance tax was scrapped in 1985 for failing to achieve objectives of reducing the unequal of wealth distribution and assisting states in financing development schemes

Congress leader Sam Pitroda’s comments calling inheritance tax in parts of the United States (US) interesting legislation has triggered a fresh political row amid the ongoing national polls. Prime Minister Narendra Modi latched onto the remarks as he doubled down on Congress’s alleged intention to redistribute wealth. He said the Congress plans to tax inheritance from parents to their children even as the opposition party maintained Pitroda did not represent its position.

Congress leader Sam Pitroda. (X)

Inheritance tax is back in the news 39 years after the estate duty was scrapped in March 1985. The move came after the then finance minister Vishwanath Pratap Singh in his Budget speech in 1985 said the duty had not achieved the twin objectives of reducing the unequal distribution of wealth and assisting the states in financing their development schemes. He said the yield from estate duty was only about ₹20 crore but the cost of administration was relatively high.

A tax was levied in India for over 30 years on assets gained as part of inheritance. Heirs paid tax for inheriting property or assets when they passed on to them. Forty percent was the maximum marginal rate levied on property exceeding the value of ₹50 lakh.

The Wealth (Inheritance) Duty Bill, 1989, sought to renew the taxation and to overcome the implementation issues with the previous legislation. Nothing came out of it with the dissolution of Parliament that year.

Proponents of inheritance tax argue it helps address disparities inherited wealth causes. Inherited wealth is mainly blamed for economic inequality.

The estate duty introduced in India in 1953 covered both movable and immovable property. The legal representative who benefitted from the passing on of the property had the primary liability.

Tax is levied on inherited wealth in countries such as France, Germany, the US, Greece, and Japan to help check the concentration of wealth and inequality.