Wealth Tax Reintroduction Proposal

By | March 8, 2015
An Article on Wealth Tax Reintroduction Proposal
An inheritance tax or estate tax or death duty is a tax paid by a person who inherits money or property of the deceased. The tax is usually levied on the net value of assets that is passed on to the heirs of a deceased person.HISTORY OF INHERITANCE TAXInheritance tax was known as an estate duty in India and it was scrapped in 1985 by the Rajiv Gandhi government. The reason was that the tax collected was lesser than the administrative cost.

The act was considered too complex involving different valuations and also perceived to be a form of double taxation of the same wealth. Also, estate duty had not achieved the twin objectives behind its introduction, namely, to reduce unequal distribution of wealth and to assist the states in financing their development schemes.

At present, there is no separate Gift Tax Act. A provision under section 56(2) of the Income-tax Act has certain specified gifts that are chargeable to tax. These are cash gifts in excess of Rs 50,000 and receipts-in-kind, being immovable property or any other specified property, the value of which exceeds Rs 50,000 in aggregate. These are taxable in the hands of the receiver if received without consideration or for inadequate consideration. However, section 56(2) exempts from tax gifts received under will or by way of inheritance and in contemplation of death.In order to avoid a lengthy legislative process, there is likely possibility that inheritance tax is reintroduced as an amendment to the existing provisions of section 56(2) of the Income-tax Act, by withdrawing the exemptions available on gifts under will, inheritance and in contemplation of deathContribution to the national exchequer: The tax fetched Rs. 20 crore in FY85 (0.4% of direct taxes). If the share remains the same, it could fetch Rs. 3,029 crore in 2014­-15 which can be used as investment money