Even before the dust could settle on the wealth redistribution row, Congress's Sam Pitroda ignited a fresh political controversy on Wednesday after calling inheritance tax an "interesting idea".
“If one has $100 million worth of wealth and when he dies he can only transfer probably 45% to his children, 55% 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 public, not all of it, half of it, which to me sounds fair," Pitroda, who is the Indian Overseas Congress chairman, said.
He said that India does not have such a provision. “If somebody is worth Rs 10 billion and he dies, his children get Rs 10 billion and the public gets nothing ... So these are the kind of issues people will have to debate and discuss. I don't know what the conclusion would be at the end of the day but when we talk about redistributing wealth, we are talking about new policies and new programs that are in the interest of the people and not in the interest of super-rich only."
Pitroda's remarks have added further fuel to the raging wealth distribution debate. Prime Minister Narendra Modi and Union home minister Amit Shah launched an all out attack on Congress over Pitroda's remarks, saying that the party's "dangerous intentions" have come to fore yet again. Using LIC's popular tagline, PM Modi said that Congress's motto is: "Congress ki loot, zindagi ke saath bhi, zindagi ke baad bhi".
What is inheritance tax?
There is no federal law on inheritance tax in US. However, several states levy two types of taxes: Inheritance tax and estate tax. Estate tax is imposed on the total value of the deceased person's estate, while inheritance tax is imposed on the individuals who inherit assets or property from the estate.
Around 12 states impose estate taxes, while six states — Iowa, Kentucky, Maryland, Nebraska, New Jersey and Pennsylvania — enforce inheritance taxes.
Of these, Iowa will abolish the inheritance tax by 2025.
How is it calculated?
An inheritance tax is applied only to the portion of an inheritance that exceeds an exemption amount. The exemption amount is usually quite high (at least $1 million). The rates above these thresholds are determined on a sliding basis, ranging from 1% to as much as 18%. Usually, those who are closely related to the deceased usually get higher exemption and therefore pay lower taxes.
According to an article in Investopedia, surviving spouses are exempt from inheritance tax in all six states. Domestic partners are exempt in New Jersey. Descendants are only subject to an inheritance tax in Nebraska and Pennsylvania.
Did India ever have inheritance tax?
India does not have any tax on inheritance. The Inheritance or Estate Tax was scrapped in 1985 by the then Rajiv Gandhi government.
But when it was in force, inheritance tax was levied on assets or property transferred to legal heirs upon the death of the owner, be it children or grandchildren. Before it was abolished, a high “estate duty” of up to 85% of the inherited property’s value was required to be paid by the executors of the deceased’s estate under the Estate Duty Act of 1953.
Congress distances itself from Pitroda's remarks
Meanwhile, Congress has said that Sam Pitroda's controversy on inheritance tax was "personal" and do not reflect the stance of the party.
Congress general secretary Jairam Ramesh said on X: "Mr Pitroda expresses his opinions freely on issues he feels strongly about. Surely, in a democracy an individual is at liberty to discuss, express, and debate his personal views. This does not mean that Mr. Pitroda's views always reflect the position of the Indian National Congress. Many times they do not. Sensationalizing his comments now and tearing them out of context are deliberate and desperate attempts at diverting attention away from Mr. Narendra Modi's malicious and mischievous election campaign; that is anchored only in lies and more lies."
With his remarks triggering a row, Pitroda said that it is "unfortunate" how his views were twisted by media to divert attention from "PM Modi's lies".
"I mentioned US inheritance tax in the US only as an example in my normal conversation on TV. Can I not mention facts ? I said these are the kind of issues people will have to discuss and debate. This has nothing to do with the policy of any party including Congress," he said.
(With inputs from agencies)
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