Union Budget 2019: Is Inheritance tax set for a comeback after 35 years, in Budget 2019?

Chances are high that in the Union Budget 2019, Finance Minister Nirmala Sitharaman may reintroduce 35-year-old inheritance or estate tax in her first budget speech.

Inheritance tax is levied on the wealth inherited by the legal heirs of a deceased person. Also known as estate tax, it is levied by governments of most western countries, (US and the UK). India too had this tax (from 1953), but it was abolished by the Rajiv Gandhi government in 1985.

In India, property/estate duty was implemented as an effort to decrease financial disparity in 1953 under the Estate Duty Act, 1953. Estate duty levels were progressive and on properties exceeding Rs 20 lakh grew to 85 percent

READ | Union Budget 2019 | Income Tax Structure Over The Years In India: From 97.75% To 30%

What is Inheritance tax?

Inheritance tax implies a tax on property, jewelry, stocks, FDs, money in bank, immovable and mobile property transferred to successors (family members) after the real owner's death.

Will the Finance Ministry impose inheritance tax to bring about social economic parity?

There are two different point of views to look at it -

• The reason is that some economists feel that reintroducing it to increase tax collections will be a good idea, and the boosted collections can then support greater social sector expenditure.
• On the contrary, it could lead to further inconvenience, particularly for the vast majority of lower- and middle-income groups that have inherited property, as well as for non-working class females and kids who have inherited property after a parent /spouse's death.

Furthermore, by levying an extra tax, it only implies that with another tax, the state would cripple the common man's purchasing power.

READ | Budget 2019 Live Updates: Finance Minister Nirmala Sitharaman To Present The First Union Budget Of The Modi Government 2.0 In Parliament

A solution that is being discussed is to only levy the inheritance tax on the super- rich so that the state rakes in the additional collections and helps its pro poor policy agenda. This would be perfect, many say, because the income gap will also be reduced.

(With inputs from PTI)