Wealth tax and inheritance tax
Also called: Wealth tax, Inheritance tax, Estate duty · Topic: Taxation: Direct and Indirect Taxes, GST and Global Tax Issues · NCERT: Beyond NCERT
Meaning
A wealth tax is charged every year on a person's net assets, meaning everything they own minus what they owe. An inheritance tax, also called estate duty, is charged on property passed on at a person's death. Both tax a stock of wealth, not a yearly flow of income. India has neither today:
- Estate duty ran from 1953 to 1985.
- Wealth tax was abolished in Budget 2015-16 and replaced by an additional surcharge on the super-rich.
Both yielded little revenue, so NCERT calls them paper taxes. The inheritance-tax debate revived in 2024.
Example
Under a wealth tax, a person owning ₹50 crore of property and shares would pay tax each year on that ₹50 crore, even without earning any new income. Under an inheritance tax, their children would pay tax when the property passed to them.
Don't confuse with
- Income tax: charged on what a person earns during the year, not on what they own.
- Capital gains tax: charged only when an asset is sold at a profit, not on simply owning or inheriting it.
Related concepts
- Income tax
- Corporate tax
- Minimum Alternate Tax
- Capital gains tax
- Securities Transaction Tax
- Angel tax
- Paper taxes
- Tax deducted at source
- Faceless assessment