Context:
Use of inheritance tax to address economic inequality is being widely debated in India.
Inheritance tax:
- Tax levied on property inherited upon an individual’s death.
- Differs from estate tax, which is levied on the total value of a deceased person’s estate.
- Global status – Levied by many countries like Japan, South Korea etc.
- Case of India – In India, currently there is no inheritance tax.
- Earlier, estate duty was imposed in 1953.
- Tax rate reached up to 85%, making it highly unpopular and thus was abolished in 1985.
Pros and Cons of Inheritance Tax:
| Pros | Cons |
| May lead to an increase in revenue generation for the government. | Due to the high taxation rate, loopholes such as tax evasion and avoidance can be used. May lead to distress sales for depositing taxes. |
| May reduce wealth inequality and promote equality of opportunity | May amount to double taxation as assets inherited might have been already taxed |
Source: The Indian Express
Previous Year Question
If the interest rate is decreased in an economy, it will
[UPSC Civil Service Exam – 2014 Prelims]
(a) decrease the consumption expenditure in the economy.
(b) increase the tax collection of the Government
(c) increase the investment expenditure in the economy
(d) increase the total savings in the economy
Answer: (c)
