Amidst the political uproar surrounding ‘inheritance tax’ in India, an old video featuring Nikhil Kamath, co-founder of Zerodha, where he is discussing the issue with Mint, has surfaced. In the video, Kamath expresses his support for inheritance tax in India. “When wealth is passed down from one generation to another, there needs to be a mechanism in place to redistribute a portion of it. Inheritance tax has ample precedence,” Kamath stated in this conversation with Mint.
His comments coincide with a wider discussion on wealth distribution, prompted by recent remarks from Sam Pitroda, Chairman of the Indian Overseas Congress, on the inheritance tax in the US.
“South Korea, America, and the UK have inheritance taxes, known as estate taxes. For India, where only about 3% of the population pays income tax, implementing an inheritance tax could bring more people under the tax net,” Kamath asserted in the video.
He further suggested that such a measure targeting the ‘extremely affluent’ could provide the government with the necessary resources to undertake required reforms. Kamath added that inheritance tax could be a viable means to achieve this objective.
Some argue against implementing an inheritance tax in India, stating that it may not be justified. “An inheritance tax disincentivises people to work hard and could lead the country backward,” said Mumbai-based investment and tax expert Balwant Jain.
In his view, implementing an inheritance tax does not serve the national interest.
Zerodha’s Nikhil Kamath supports ‘inheritance tax in India’ Watch the full video here
The concept of an inheritance tax is not new to India. This tax was prevalent in India before it was abolished in 1985.
Introduced in 1953 under the Estate Duty Act, the inheritance tax aimed to reduce economic disparity. The government at the time identified significant wealth inequalities and conceived the idea of such a tax.
Neeraj Agarwala, partner at Nangia Andersen India, stated that according to section 47 of the Income Tax Act, the transfer of capital assets through inheritance is not considered a taxable transfer. Therefore, receiving ₹20 lakh and two house properties through inheritance does not incur any tax liability at present. Any tax obligation would arise only upon the eventual sale of the house property in the future. He emphasised that there is currently no provision in the income tax return for declaring inherited property, and thus, no additional disclosure is required for these inherited assets.
Sam Pitroda sparks debate on ‘inheritance tax’ in India
Sam Pitroda pointed to the existing inheritance tax in America, where 45% of wealth can be transferred to children upon death, while 55% goes to the government, emphasising the fairness of such a system. Pitroda highlighted the absence of a similar provision in India, where heirs inherit the full wealth, leaving nothing for the public. He stressed the need for debate and discussion on these issues, asserting that wealth redistribution policies should prioritise the interests of the people, not just the super-rich.
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Published: 25 Apr 2024, 10:58 AM IST
