He argued that an inheritance tax ensures a fair redistribution of wealth and emphasised the idea that individuals should leave a portion of their wealth for the public good.

Pitroda’s comments sparked contrasting opinions, with Prime Minister Modi criticising it. PM Modi equated it to an encroachment on the hard-earned assets of the middle class.

Amidst this political uproar, an old video featuring Nikhil Kamath, co-founder of Zerodha, surfaced in which he is seen voicing support for an inheritance tax while speaking to a news outlet. In the video, he advocated for mechanisms to redistribute wealth across generations.

So, what is inheritance tax?

Inheritance tax, also known as estate duty, is a levy imposed on inherited movable and immovable assets. It is paid by the receiver of the inheritance upon the death of the donor.

Upon the demise of an individual, their properties are transferred to their legal heirs, typically comprising children, grandchildren, or wards.

Often, these inherited properties serve as a source of income for the new owner, manifesting in forms such as rent or interest.

Consequently, the new owner assumes the responsibility of declaring this income and fulfilling their tax obligations accordingly.

Calculation

The calculation of inheritance taxes varies from one country to another.

The tax rate is contingent upon the value of the inheritance and the relationship between the deceased and the beneficiary.

Inheritance taxes are computed on a sliding scale, with exemptions granted based on the relationship with the deceased.

For instance, in the United States, surviving spouses are exempt from paying inheritance taxes.

Global practice

Countries like the United States and the United Kingdom are key jurisdictions where inheritance tax is levied.

There are no inheritance tax provisions in China.

Indian context

In India, estate duty was prevalent until it was abolished in 1985, with rates reaching a peak of 85% in the mid-1980s.

Additionally, India abolished the wealth tax in 2015 and the gift tax in 1998.

Income tax implications

Although India lacks a specific inheritance tax, inherited assets can still have income tax implications.

When individuals inherit properties, they may generate income, such as rent or interest, which is subject to income tax obligations for the new owner.

Thus, while there may not be a direct inheritance tax, inherited assets can still impact income tax liabilities.

Also Watch | During a conversation with CNBC-TV18, Dinesh Kanabar, CEO of Dhruva Advisors; Sudhir Kapadia, Partner-Tax & Regulatory Services at EY; Bijal Ajinkya, Partner at Khaitan & Co; and Mohandas Pai of Aarin Capital Partners talked about the possibility of implementing taxes like inheritance tax, estate duty, wealth tax, or gift tax, and whether there’s a justification for such measures.