Inheritance tax will increase black money, discourage people from revealing income, says senior advocate Aryama Sundaram

CA Sundaram- Senior Advocate on inheritance tax

If inheritance tax is brought back it will increase black money in the country and discourage people from disclosing their income and net worth, according to senior advocate Aryama Sundaram.

“In India taxation is high, estate duty was very high at one time and crippled a lot of families. Estate duty was rightly taken away; after taking it away, people were no longer worried about disclosing their wealth. When the law was in operation a lot of people did not disclose their wealth,”  Sundaram said in an exclusive conversation with Moneycontrol.

The senior advocate noted that when estate duty was in operation people hid their wealth in ‘mattresses and gold bars’ rather than in bank accounts in order to pass it on to the next generation. “Otherwise, the government was going to take a part of it,” he said.

Sundaram said, “We are not a country like the Scandinavian countries where tax rate may be high but the state gives you everything like education, electricity and healthcare for it. Here when you pay taxes you don’t get anything in return.”

According to Sundaram, people already pay taxes to the government, they are entitled to keep a certain percentage of their earnings for themselves and their family. However, if by imposing a tax the government does not allow this either, then they may not want to disclose their income in the first place.
“I am totally against estate duty, because in the socioeconomic context of India I don’t think it’s a worthwhile or a good system to have,” Sundaram said.

Estate duty, India’s old inheritance tax

Estate duty was India’s inheritance tax that existed between 1953 and 1985. It was abolished a year after Rajiv Gandhi assumed prime ministership. Congress leader VP Singh was the finance minister when the law was repealed.

In his 1985 Budget speech Singh batted for abolishing the tax noting that the existence of two separate laws to tax a person’s property while he was alive (wealth tax) and after he dies (estate duty) amounted to harassment of taxpayers. He also said that estate duty had not achieved its stated objectives of ameliorating the unequal distribution of wealth and assisting states in financing their development schemes.

On April 24, Sam Pitroda, chairman of the Indian Overseas Congress, an arm of the grand old party, created a flutter by bringing up inheritance tax while defending the Congress’ wealth redistribution narrative.

The Congress was quick to distance itself from this remark. Senior party member Jairam Ramesh took to social media platform X to say, “This does not mean that Mr. Pitroda's views always reflect the position of the Indian National Congress. Many times they do not.” Ramesh also said this was Bharatiya Janata Party's (BJP) tactic to divert attention from other serious issues.

Aryama Sundaram is a leading lawyer at the Supreme Court.  He has appeared in a wide spectrum of cases involving Constitutional, commercial, corporate and taxation laws.