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Inheritance Tax

Why is it in the news?

  • Sam Pitroda (former adviser to Rajiv Gandhi) comment on the inheritance tax in the US has sparked controversy.

About the Inheritance Tax

  • Inheritance tax, also known as estate duty, was abolished in India in 1985 by the government of Rajiv Gandhi. Wealth tax and gift tax were also abolished in 2015 and 1998 respectively.
  • Calls for taxing billionaires to address income inequality have gained traction globally, with proposals for a global minimum corporate tax rate and higher taxes on wealth.
  • Taxes can be levied on income, wealth, or transfer of wealth/assets, with examples including capital levy, transfer taxes (inheritance tax, estate tax, gift tax), and minimum income tax on billionaires.
  • The abolition of estate duty and wealth tax in India was due to concerns about low revenue collection, high cost of administration, and the burden on taxpayers.
  • Internationally, tax rates on wealth have declined, with only a few countries still levying broad-based wealth taxes.
  • Wealthy individuals often exploit loopholes and preferential treatments to reduce their tax burden, leading to low effective tax rates on their wealth.

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