A significant political controversy has arisen following Sam Pitroda's mention of a proposal resembling the inheritance tax system in the United States. However, it's crucial to note that the notion of an inheritance tax isn't unfamiliar to India, having been previously discussed by both the BJP and Congress.
Jairam Ramesh of the Congress clarified the party's stance, stating that they currently have no intention to implement an inheritance tax, highlighting that Rajiv Gandhi eliminated the estate duty in 1985. This attempt aims to alleviate the tensions sparked by Pitroda's remarks advocating for a "US-like inheritance tax" in India.
The concept of an inheritance tax has historical roots in India. Referred to as estate duty or "death tax" in some nations, it was prevalent in India around four decades ago before its abolition in 1985. Since then, both the Congress-led UPA government and the NDA regime have considered reintroducing such a tax.
Former finance minister P Chidambaram proposed the idea multiple times between 2011 and 2013 to bolster government resources. Similarly, during the initial term of the NDA government, former Minister of State for Finance Jayant Sinha strongly supported the notion.
Chidambaram's advocacy for inheritance tax started in 2011 during a meeting chaired by then Prime Minister Manmohan Singh. He emphasized the need for tax resources to address declining tax-to-GDP ratios and wealth concentration.
The complexity of the estate duty legislation, coupled with varying valuation rules for different types of property, led to widespread criticism and litigation during its enforcement. Moreover, the actual tax collection was insignificant compared to the administrative costs, as individuals found ways to evade payment.
Despite these challenges, the idea of reintroducing inheritance tax resurfaced in subsequent years, with figures like Arun Jaitley advocating for its implementation to foster philanthropy and address wealth disparity.
In essence, while the inheritance tax proposal has ignited debates and controversies, its history in India reflects a complex interplay of economic, political, and social factors shaping taxation policies over the years.
