Budget 2019: Will the inheritance tax be fixed after 35 years?
NEW DELHI: A tax on property, jewelry, stocks, fixed deposits (FD), cash in the inherited bank is likely in the next Budget of the Union, official sources said here on Wednesday.
The sources explained that the measure would not be to increase resources but to demonstrate the orientation of the government in favor of the poor, to discourage accumulation of wealth & fight against black money .
Globally, the UK is an example where such a tax is levied. While experts have said this tax will harm a slowing economy needing capital, the finance ministry is likely to present it as a "bold & inclusive move" to deny the rich more wealth via inheritance which would create further distortion in wealth distribution in the country.
The finance ministry, however, does not think on these lines. Officials said the time is right for levying such a tax, which people can avoid by giving donations to government-approved institutions & trusts for public welfare.
The sources also said that the government is considering reintroducing a wealth tax on inherited property & illiquid assets after 35 years. In 2005, the then finance minister P. Chidambaram had introduced a banking cash transaction tax (BCTT) of 0.1 per cent on cash withdrawals above Rs 10,000 -- a limit which was later raised to Rs 25,000.
However, the tax was discarded in 2009 due to the low collection in this count.
In many countries, the heir must pay Inheritance tax to inherit any property or patrimony of parents, grandparents or any other relative or friend.
Currently, the Income Tax Act of 1961 clearly excludes a transfer case under a testament or inheritance from the scope of tax on donations . Consequently, Indian law does not provide for the taxation of assets received by inheritance.
The Heritage or the Wealth Tax was abolished as of 1985. Once a property is inherited, the owner can choose to sell it later. In this way, the capital gain Or the loss too, will accrue to the legal heir.
Further, the holding period of ownership will determine whether capital gain s will apply under long-term capital gain s tax or short-term capital gain s tax.
Tax experts are unanimous about the negative impact of such a tax. Inheritance tax is called inheritance tax. It was simply a tax on wealth. All of a father's assets for his children, minus responsibilities, could be included, said tax expert Ved Jain to IANS.
When the new tax is introduced to avoid repetitions, the government can set a 5 or 10 percent tax on inheritance assets of more than 10 million rupees. It may not be a large amount, but in India how many people have Rs. 10 million years, he said.
You can not raise many funds through such a tax. It is not imposed to collect income, it is a thought process - socialist or communist or capitalist. It is not a revenue generating measure. It is a socialist thought. This will hurt the economy, Jain added.
According to the expert, "globally, a developed country like US imposes such taxes & there are there no issues. But India is a developing country, needs capital formation. It will seriously affect the industry.
The main challenge for the inheritance tax is the liquidity to pay the tax. If one has shares worth Rs 50,000 million in a company, if he pays Rs 5,000 crore, the person has to sell the shares to pay the tax.
You will need a property of Rs 100 crore to pay Rs 10 crore tax ... from where will you pay one? Jain asks.