Sam Pitroda’s Inheritance tax remark sparks political debate amid Lok Sabha elections

Indian Overseas Congress president Sam Pitroda’s recent comment on Inheritance tax has rekindled the debate surrounding the law 39 years after the Estate Duty tax was scrapped in 1985.

Prime Minister Narendra Modi pounced on Pitroda’s remarks to accuse the Congress of intending to take away people’s wealth even after death.

The Congress clarified that it had no intention of bringing an inheritance tax if voted to power and has distanced itself from Pitroda’s comments. The senior leaders of the party have in turn claimed that the BJP has in the past advocated for such a tax. 

Meanwhile, the BJP is not letting this moment slip away with various leaders using Pitroda’s comments to malign Congress saying it has a deeper agenda.

The controversy emerges amid another ongoing debate on PM Modi’s recent remark of “redistribution of wealth”. He accused Congress of doing a survey to determine which group or community had control over what proportion of resources, alleging that it indicated a plan to redistribute these resources to Muslims.
 

What did Pitroda say

Sam Pitroda, during an interview with news agency ANI, said the Congress has always focused on the people at the bottom of the economic pyramid, whether they are OBCs, Muslims, Dalits or tribals. 

"Billionaires don't need our help. It is the poor people who need our help. Inequality has substantially increased in the last 10 years," he said.

"This doesn't mean that you are going to take your wealth and give it to somebody. This means to create new policies so that the concentration of wealth can be prevented. It's like a Monopoly Act," he said.

He cited an example from US which led to the controversy. "In America, there is an inheritance tax. If one has 100 million USD worth of wealth and when he dies he can only transfer probably 45 per cent to his children, 55 per cent is grabbed by the government. That's an interesting law. It says you in your generation, made wealth and you are leaving now, you must leave your wealth for the public, not all of it, half of it, which to me sounds fair," Pitroda said.

History of Inheritance Tax in India

The story of an inheritance tax in India dates back to seven decades, when in 1953, the Parliament, led by prime minister Jawaharlal Nehru, passed a legislation, bringing into force the Estate Duty Act.
The act was passed with an objective to reduce the stark economic disparity in a country that was just six years into Independence. 

Estate duty was imposed on the total value of property held by an individual at the time of their demise, with 40% the maximum marginal rate levied on property exceeding the value of ₹50 lakh, reports Hindustan Times.
Under the act, the tax had to be paid by heirs when they inherited property or assets — both movable and immovable — that were passed on to them.

What happened next
While the proponents of the law contended that it helped address economic disparity because of inherited wealth, it came under sharp criticism for other issues which included the different methods adopted for the valuation of properties and double taxation — estate levy was charged on top of an income tax.

Thus, in March 1985, 32 years after it was enacted, the Congress government under then prime minister Rajiv Gandhi scrapped the law. 

Then finance minister Vishwanath Pratap Singh, in his Budget speech, told Parliament that the duty had not achieved objectives of reducing unequal distribution of wealth and assisting the states in financing development schemes. 

Singh said that the yield from the duty was only about ₹200 million but the cost of administration was relatively high, with a massive spike in litigation being filed before courts.

Rajiv Gandhi government tried introducing a revised law
Four years later, in 1989, the Rajiv Gandhi government made an attempt to bring back a revised legislation, called The Wealth (Inheritance) Duty Bill, 1989, which sought to simplify estate duty mechanisms. 

By November 1989, the Congress government had lost the general elections and no further movement on the bill took place.