What Is Inheritance Tax Firestorm: Pitroda's Proposal Reignites Debate on Wealth Redistribution

Sam Pitroda, chairman of the Indian Overseas Congress, has sparked a contentious debate by proposing a 50 percent inheritance tax in India, akin to the system in the United States. Pitroda argues that such a tax would address wealth inequality by redistributing assets, drawing parallels with the U.S., where six states impose inheritance taxes. It means whatever a person builds in his lifetime, their heirs will only get 50%, and the other 50% will be charged as a tax. 

Inheritance tax rates vary from under 1% to 20% of the inherited assets but are applied only to amounts exceeding a set threshold. For example, if a person inherits assets valued at $3 million and the threshold is $1 million, tax is levied on the remaining $2 million.

The estate duty, introduced in 1953, taxed assets transferred from deceased individuals to their heirs. Rajiv Gandhi removed this taxation system to simplify taxes and promote investment and savings. Pitroda's proposal reignites discussions on the balance between wealth redistribution and economic growth.

In an interview with ANI, Pitroda said, “In America, there is an inheritance tax. If one has $100 million worth of wealth when he dies, he can only transfer probably 45 percent of it to his children, and the remaining 55 percent is grabbed by the government. That's an interesting law.”