Estate Tax
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Estate Tax, also referred as Death tax or Inheritance Tax, is gaining prominence with the boom in the real estate market across the world. The Estate Tax rates vary widely across countries all over the world.
It is recorded that Japan stands at the top offering a tax rate of 70%, followed by South Korea (50%), the US (46%), and 40% for France and UK each. Along with India, there are some other countries like China, Australia, Russia, and Malaysia, which do not levy Estate tax. It should be noted that Estate Tax or Estate Duty which was earlier incorporated in India in the year 1953, was taken away under the aegis of the then Finance Minister, V.P. Singh in the year 1985. The economic growth and flourishing capital markets in India have been generating an unprecedented boost for the Indian promoters. Still not like the other advanced market economies of the world, there is no Estate Tax in India. On the other hand, across the globe the Estate Tax, also known as the Death Tax, is very important.
In general, the Estate Tax is payable on the economic value of the accumulated savings and assets of a deceased person. This tax on Estate was framed with the objective to prevent the inheritors from a rich family to enjoy too much privilege as compared to the less advantageous in the society. The intention was to strike a balance and maintain inter- generation equity. On the other hand, many tax experts often ridicule this Estate Tax, as this is difficult to assess and collect.
Moreover, for the Estate Duties, both the savings and investment also suffer along with the process of capital accumulation. Along with this, the taxpayers also try to evade such tax payments by creating trusts and shell companies to which they transfer the property and other assets of the deceased. As a result inheritors of the wealthy families gets associated with important financial trusts created by Buffet or Gates. It also has a high marginal rate leading to a large and uneconomical estate planning for tax avoidance. The tax burden is minimized with the involvement of numerous trusts, life insurance and private foundations. There are further arguments against the payment of Estate Tax, which states that as the net value of assets is taxable and not the income, it can liquidate the business of the inheritor paying the tax.
In India, the main reason for the abolition of the Estate Duty was firstly because this lead to double taxation. The taxpayers already have to pay the Stamp Duty, which is levied on the inheritors for the transfer of property. At present, the Stamp duty is between 7-9% in most states of India and can be treated as a quasi-estate duty. However, it should be noted that the stamp duty is payable on all saleable and transferred property unlike the Estate Tax that is subjected only on the property of a deceased owner.
In general, the Estate Tax is payable on the economic value of the accumulated savings and assets of a deceased person. This tax on Estate was framed with the objective to prevent the inheritors from a rich family to enjoy too much privilege as compared to the less advantageous in the society. The intention was to strike a balance and maintain inter- generation equity. On the other hand, many tax experts often ridicule this Estate Tax, as this is difficult to assess and collect.
Moreover, for the Estate Duties, both the savings and investment also suffer along with the process of capital accumulation. Along with this, the taxpayers also try to evade such tax payments by creating trusts and shell companies to which they transfer the property and other assets of the deceased. As a result inheritors of the wealthy families gets associated with important financial trusts created by Buffet or Gates. It also has a high marginal rate leading to a large and uneconomical estate planning for tax avoidance. The tax burden is minimized with the involvement of numerous trusts, life insurance and private foundations. There are further arguments against the payment of Estate Tax, which states that as the net value of assets is taxable and not the income, it can liquidate the business of the inheritor paying the tax.
In India, the main reason for the abolition of the Estate Duty was firstly because this lead to double taxation. The taxpayers already have to pay the Stamp Duty, which is levied on the inheritors for the transfer of property. At present, the Stamp duty is between 7-9% in most states of India and can be treated as a quasi-estate duty. However, it should be noted that the stamp duty is payable on all saleable and transferred property unlike the Estate Tax that is subjected only on the property of a deceased owner.
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