Govt should levy it only under specific circumstances
Inheritance tax is levied mostly in developed countries, at rates as high as 55%. In India, it was in force till 1985, payable on a slab basis, ranging from 10% to 85% of the principal value of the property. However, implementation and procedural issues resulted in its elimination.
Inheritance tax, if reintroduced, is expected to bring economic stability in India. Moreover, it would reduce wealth concentration, widen tax base and enhance revenue, which may eventually lead to reduction in tax rates.
However, reintroduction of the tax might be met with resistance from Indian taxpayers, as the same property would then incur both income tax and inheritance tax. The government should, thus, consider levying it only under specified circumstances, along with exclusions and limits. For instance, the inheritance of one residential house property may be exempt from this tax. This would also necessitate a strong social security system to circumvent any setbacks.
The government must also try to find a way to prevent Indians from taking or retaining their wealth outside India.
Surabhi Marwah, tax partner and private client services leader, EY India