INHERITANCE TAX: AN ECONOMIC BLUNDER

THE belief of leaving behind an inheritance or legacy for one's progeny has remained in the human psyche for time immemorial.

-  ANANT MERATHIA

However, opinions differ based on how accumulated wealth over a lifetime should be distributed after an individual's lifetime. Recently, Sam Pitroda, the Chairman of the Indian Overseas Congress, has spoken in favour of introducing an "inheritance tax" in India. Citing the US as an example, he highlighted how a significant percentage of wealth is taxed by the government, and the rest is inherited by an individual's descendants.

Pitroda spoke in favour of leaving a portion of one's wealth to the public. This proposition has not just sparked a controversy across the country.

What Is Inheritance Tax?

Inheritance tax refers to the transfer of property or assets to heirs upon the demise of their previous owner. This process is governed through legal frameworks and norms which differ from country to country. In France, the same is governed under droits de succession law. In this, French citizens that inherit properties pay between 5-60% in inheritance tax, while additionally having 100,000 Euros as an allowance for direct descendants and lower amounts for indirect descendants.

In the US, different states have different rates of inheritance taxes. This is greatly debated in the US itself, in which individuals on the conservative side of the political spectrum, feel that such taxes cause double taxation -- the wealth accumulated had already been taxed, and now is being taxed once again when being inherited by the descendants, thus disincentivizing people in the lower and middle classes of society, who have worked tirelessly to accumulate the property that they have.