What You Must Know About Estate Duty by Mr. Anil Rego, Right Horizons

An Estate duty or /  inheritance tax is a tax paid by a person who inherits assets (cash & Non-cash) or a tax on the estate (total value of the money & property) of a person who has deceased.

It does not matter if the person has a legal Will or /  not, the assets are still subject to estate duty. The deceased person's assets, as a sum, are called an estate.

Inheritance taxes started in India with the motive of bridging the gap between the rich & poor on a more long-term basis and to start to deliver on a more inclusive development path but in 1985 it was trashed by the government due to increased costs of collection.

 

Mt. Anil Rego,
Right Horizons

According to the Estate Duty Act, 1953 at that time, the limit was only Rs. 1.50 lakh of exemption and the rate of estate duty was on a progressive basis, with a maximum rate of 85 % for estate exceeding Rs. 20 lakh. There was significant legal process on a variety of aspects, including valuation, which forced govt to discontinue the same.

The hike in the levy of inheritance tax in the US and target of reducing fiscal deficit has now impelled the Indian government to reconsider the introduction of the tax again.

 

There were high predictions that finance minister will introduce the estate duty in the current budget session but it was not put forth with the fear of potential flight of capital offshore by domestic investors.

Few problems involved in levying estate duties are difficulty in determining fair value of assets for the tax purpose, deciding tax rate, exemptions on few assets and conflict with other existing tax rules like gift tax etc.

With the Indian economy in a process of accumulating wealth, a bulk of which is in the form of physical assets like real estate or shares in listed companies, the levy of an estate duty cause a sell off of those assets & prove to be counter-productive for economic development.

The time is not correct to plan for the reintroduction of an inheritance tax or an estate duty and for the time being proposed wealth tax regulations under direct tax code will suffice the purpose.

About The author..

Mr. Anil Rego is CEO and founder at Right Horizons

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