Congress plans to target middle class with inheritance tax: Sitharaman

Sam Pitroda argued that his remarks were merely a discussion on policies in the US and not a proposal for India

Finance Minister Nirmala Sitharaman on Wednesday said the Congress party's plan to impose inheritance tax is aimed at hitting the middle and aspirational classes as they will not be able to pass on their savings to their children.

She said in a tweet, "So, the @INCIndia plan is: While living—Tax. On death —Tax (Inheritance). Aims to hit the middle and aspirational classes. Their savings or small holdings shall not go to their children.”

तो, @INCIndia की योजना है:
जीते जी - कर
मृत्यु पर - कर (विरासत)
इसका उद्देश्य मध्यम और आकांक्षी वर्ग को चोट पहुंचाना है। उनकी बचत या संपत्ति उनके बच्चों के पास नहीं जाएगी।

डॉ. मनमोहन सिंह का "संगठित लूट और विधि-सम्मत डाका" कार्रवाई में दिखेगा ।
कांग्रेस का #टैक्सटेररिज्म pic.twitter.com/pMfhgzpbNO

— Nirmala Sitharaman (Modi Ka Parivar) (@nsitharaman) April 24, 2024

 

What is inheritance tax

In the United States, inheritance tax is not federally mandated but is imposed by several states. It is distinct from estate tax, which is levied on the estate's total value before distribution. Inheritance tax, on the other hand, is charged based on the value of assets received by the inheritors, often above a high exemption threshold. This tax varies by state, with some states planning to phase it out entirely.

Abolishment of inheritance tax in India by Rajiv Gandhi govt

India abolished inheritance tax in 1985 under then Prime Minister Rajiv Gandhi. Prior to its repeal, the Estate Duty Act of 1953 required heirs to pay a significant portion of the inherited value, sometimes as high as 85%, back to the government. Since the repeal, there has been no tax on inheritance in India, allowing heirs to receive the entirety of the bequeathed estate. 

Sam Pitroda's comments on inheritance tax

Sam Pitroda, while discussing the concept of inheritance tax in certain American states, highlighted that in the US, a substantial portion of a deceased's wealth might be taxed before it can be passed on to the next generation. He explained, "If one has $100 million worth of wealth and when he dies he can only transfer probably 45 per cent to his children, 55 per cent is grabbed by the government." Pitroda added that such laws are fair as they encourage wealth distribution beyond familial lines. However, he noted that India lacks similar provisions, allowing entire estates to be inherited without any portion allocated for public benefit.

Congress party's response

In response to the controversy, the Congress party distanced itself from the remarks made by Pitroda, stating that his comments were sensationalised and taken out of context. Further compounding the issue, Prime Minister Narendra Modi criticised the Congress at a rally, interpreting Pitroda's comments as indicative of the party's intent to impose such taxes.

Pitroda argued that his remarks were merely a discussion on policies in the US and not a proposal for India.

With PTI inputs