Sam Pitroda Controversy: Chief of the Indian Overseas Congress Sam Pitroda’s comments regarding the US inheritance tax have created a political storm in India in the midst of the 2018 Lok Sabha elections. Pitroda used the US inheritance tax law as an example to refute the Prime Minister’s claims that Congress intends to divide the country’s wealth, sparking a big controversy in the process.
Pitroda’s Remarks on US Inheritance Tax
“If a person has property worth US dollars 10 million, then after his death, 45 per cent of the property goes to his children and 55 per cent of the property goes to the government,” Pitroda informed ANI that such a law does not exist in India. “Such issues should be discussed. We are talking about policies that are in the interest of the people, not just the rich,” he added.
Inheritance Tax in the United States
First off, only six of the 50 states in the US have the tax in place, making it uncommon in the country. Recipients who inherit assets from a deceased individual are subject to the tax. The state in which a person lived or possessed property determines how much they are taxed.
Inheritance tax and estate tax in the US differ significantly. While the latter is solely assessed against the beneficiaries, the former is imposed on the estate itself prior to distribution. Six US states—Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania—collect inheritance taxes.
Federal Inheritance Tax in the United States
A federal tax, that is not. It is assessed in accordance with the property’s worth and the inheritor’s relationship to the deceased. Only the portion of the inheritance that exceeds the exemption limit is subject to it. When the threshold is exceeded, the tax is often imposed on a sliding scale with rates ranging from single digits to eighteen percent.
For instance, in Pennsylvania, gifts to siblings are taxed at 12%, gifts to direct descendants (also known as lineal heirs), and gifts to other heirs are taxed at 15%. In Iowa, no tax is owed if the value of the property is less than $25,000 (around Rs. 20.83 lakh). Inheritances from estates worth less than $50,000 (around Rs 41.66 lakh) are likewise excluded in Maryland. In summary, the tax rate would be lower the closer an inheritor is to the asset owner. The owner’s spouse is excluded in each of the six states.
Inheritance Tax Rates Around the World
A 40% inheritance tax is applied in the UK to assets valued more than 325,000 pounds (about Rs 3.37 crore). Japan has one of the highest rates of inheritance taxation in the world, now at 55%. The amount of money that each statutory heir receives determines the rate.
In the meantime, the inheritance tax rate in South Korea is 50%. In 2021, the late patriarch Lee Kun-hee’s family of Samsung Electronics announced that they will pay over 12 trillion won ($10.78 billion) in inheritance taxes on his estate.
Who Repealed Inheritance tax law
India had an inheritance tax law until it was repealed in 1985 by then Prime Minister Rajiv Gandhi. The Estate Duty Act of 1953 created an estate duty, a type of tax that was assessed at the time of a person’s passing.
It was only due if the inherited share of the property’s total worth was greater than the exclusion threshold. It was set at 85% on properties in India. A 7.5% tax rate applied to properties valued at least ₹ 1.5 lakh. The goal was to reduce the gap in income, but it was abandoned in 1985.
Why It Repealed?
India’s inheritance tax was eliminated in 1985, according to a study by the Economic Times, since it had no discernible impact on reducing economic disparity in society. The Estate Duty Act brought in ₹ 20 crore in total revenue in 1984–85, but the process of collecting that money was exceedingly expensive due to the intricate legal issues surrounding the calculating framework.
