Why in News? Right after the controversy over Rahul Gandhi's promise to conduct a financial survey to undertake an exercise to redistribute the wealth, Sam Pitroda proposed inheritance tax as a way to redistribute wealth.

What is an Inheritance Tax? Also known as estate tax, it is a tax levied on the total value of money and property of a deceased person before it is distributed to their legal heirs. The purpose of inheritance tax is often to generate revenue for the government and to redistribute wealth. It plays a significant role in shaping economic policies and social welfare systems, influencing decisions on wealth transfer and intergenerational equity.

Which Countries Levy Inheritance Tax? In Japan, the inheritance tax rate stands at 55%, making it one of the highest in the world. South Korea follows closely behind with a rate of 50%. France imposes an inheritance tax rate of 45%, while both the United Kingdom and the United States have rates of 40%. In India, the Inheritance or Estate Tax was abolished in 1985.

Why it Might not be a Good Idea to Impose an Inheritance Tax in India?

1. For a developing country like India, incentivising entrepreneurial spirit to promote private investment should be the priority. Such a tax can lead to the exodus of the high net worth individual to countries without this tax, not only taking their money out but also their entrepreneurial skills, which India needs to consistently grow at higher rates.
2. Also, it is not difficult to dodge the inheritance tax. One such method is forming a family trust which insulates their assets, because there is no transfer in ownership of assets, only a change in the trust shareholding.
3. The tax also entails some practical problems. It may be very difficult to assess the value of some inherited assets such as family antiques.