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TRENDING TUESDAY ARTICLE

INHERITANCE TAX- BENEFITS AND ISSUES

Estate or Inheritance Tax is imposed on the assets of a deceased person. The estate tax is imposed on a deceased person – the govt assesses the worth of the deceased’s estate which includes cash, investment, any property or business ownership. If the value exceeds a set threshold, it is then taxed. Inheritance tax is imposed on those who inherit assets from a deceased person.

Why Inheritance Tax?

  • Wealth, Income and consumption inequality is high and has been rising in India.
  • While Per Capita Income has risen since liberalization, growth has failed to be inclusive.
  • It helps in redistributing income, a part goes to govt which is used for the benefit of citizens.
  • It increases charitable donations – many in wealthy class donate funds to the charitable cause.
  • It can help increase government exchequer which needs funds for the civic infrastructure and social development.
  • It perpetuates inherited wealth and children of rich stay rich. Promote intra-generational inequality

Issues with Inheritance Tax.

  • It can force families to sell their business.
  • It was abolished in 1985 in India due to:-
    • Collection cost was more than the money collected. The high cost of litigation, poor implementation, and red-tapism.
    • High cost of implementation and poor revenue generation.
  • It will encourage people not to build capital and use diversionary tools to evade.

An inheritance tax coupled with associated tax reforms, can potentially prevent the concentration of income and wealth in the hands of a few, reduce intra-generational inequality, promote inter-generational equality.

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