Inheritance Tax
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Inheritance Tax, also known as Estate Tax or Death Duty is a tax arising in the event of death of an individual. However, there lies discrimination in between the estate tax and tax on inheritance as per the international tax laws.
This is because Inheritance Tax is subjected to the recipient of funds of the estate. Unlike the other advanced nations of the world, India does not include Inheritance Tax within its taxation system. However, the Inheritance Tax is applicable for the economies of other countries like the Republic of Ireland, the United Kingdom, and the United States. Inheritance Tax can also vary state wise. In some places the tax on inheritance is also referred as death duty, although in the United Kingdom and some Commonwealth nations it is no longer correct as per legal terms. Again the term estate duty is also popular in nations like Hong Kong. In places like Bermuda there is a following rise in the Stamp Duty or in Canada, death increases the charge to Capital Gains Tax, all these are broadly treated as forms of Inheritance Tax. Under some jurisdictions death induces the local equivalent amount of gift tax as in the case of Austrian economy.
In the case of United Kingdom, such was the scenario before the promulgation of Inheritance Tax in 1986. The taxes then paid on the estates were a form of gift tax known as the Capital Transfer Tax. It is to be remembered that death is been exempt from the Gift Tax in the nations where the system of paying a Gift Tax and an Estate Tax are both valid. This is because Inheritance Tax has some common features of the Gift Tax, like the tax on the transfer of any assets during the lifetime of the deceased than after the death. It should be noted that for money saving planning the Inheritance Tax payment is essential. For such one should consult professional tax consultants, online tax websites, and the simplest method is to make a proper will.
There are different provisions within the Inheritance tax, which should be followed by the taxpayers. Some of them are like -
In the case of United Kingdom, such was the scenario before the promulgation of Inheritance Tax in 1986. The taxes then paid on the estates were a form of gift tax known as the Capital Transfer Tax. It is to be remembered that death is been exempt from the Gift Tax in the nations where the system of paying a Gift Tax and an Estate Tax are both valid. This is because Inheritance Tax has some common features of the Gift Tax, like the tax on the transfer of any assets during the lifetime of the deceased than after the death. It should be noted that for money saving planning the Inheritance Tax payment is essential. For such one should consult professional tax consultants, online tax websites, and the simplest method is to make a proper will.
There are different provisions within the Inheritance tax, which should be followed by the taxpayers. Some of them are like -
- If money is given away before the death it can still be counted as part of the estate of the deceased
- If any person dies within seven years of commencing the gift the payment of the Inheritance Tax remains valid
- There is no Inheritance Tax involved with assets less than the value of £300,000
- There is also an annual exemption of the first £3,000 paid off each tax year
- The gifts given to political parties and charities are also free from Inheritance Tax
- Gifts amounting to £250 and less per tax year to any one recipient are also Inheritance Tax free
- In case of gifts from income, Inheritance Tax is exempted
- Regarding the gifts on an agreement of marriage, Inheritance Tax is exempted
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