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India had Inheritance Tax for over 3 decades, it was abolished by Rajiv Gandhi govt just a month before transfer of Indira Gandhi’s estate to her grandchildren

While India had inheritance tax for over three decades, three Gandhi grandchildren didn’t have to pay any tax on the inheritance from Indira Gandhi because the tax regime was abolished just a month ago before the Will was executed.

The Chairman of the Indian Overseas Congress and Rahul Gandhi’s advisor Sam Pitroda stroked a political firestorm after he suggested a US-like inheritance tax in India as a way to redistribute wealth. As per the Congress leader, under this tax regime, more than half of the Wealth of a citizen will be grabbed by the government once a person dies leaving only the remaining portion with their bereaved family. 

Hitting back at the controversial suggestion, PM Modi charged Congress with over-burdening Indians with taxes and rampant loot. He added that Congress’ motto is – Congress ki loot, Zindagi ke sath bhi, Zindagi ke bad bhi. Consequently, the widespread criticism and condemnation of the Inheritance tax plan forced Congress and Pitroda to distance themselves from the controversial idea. 

Notably, this is not the first time the Congress has come up with the idea of inheritance tax. The tax was in place in the country for over three decades. Under the Estate Duty Act of 1953, inheritance of property attracted tax, which could go upto 85% of the value of the inherited property. The tax system had slabs, just like current income tax slabs, with higher tax rate for higher values. For properties values above ₹20 lakh, the tax rate was 85%, which means almost all of the property was grabbed by the government after the death of the owner.

However, the Estate Duty Act didn’t work as intended. There were concerns about double taxation as assets were subject to taxation twice: first, through wealth tax during the property owner’s lifetime (which was abolished by the Modi government in FY 2016 and onwards), and then through estate duty upon their demise. Additionally, estate duty collections were drastically less than the Congress government expected due to issues such as asset concealment and ownership of benami properties.

The act was abolished in 1985 by the Rajiv Gandhi government. Now, the timing of the repealing the act is very interesting, because, it was repealed just weeks before the will of former PM Indira Gandhi transferring her properties to her grandchildren was executed.

The Estate Duty Act, 1953 was abolished in the very first budget of Rajiv Gandhi govt, when VP Singh was the finance minister. The act was abolished from the date of 1 April 1984. Just a month later, on 2 May 1984, Indira Gandhi’s Will was published, as per which her estate worth about $175,000, over ₹21.50 lakh, was handed over to her three grandchildren, Rahul Gandhi, Priyanka Gandhi and Varun Gandhi. The current value of this estate will be over ₹4.2 crore.

As per a report by United Press International (UPI) from 2 May 1985, in the will signed in 1981, Indira Gandhi had appointed her son Rajiv Gandhi and his wife Sonia Gandhi as executors of the will, but didn’t give anything to them. She also didn’t leave anything for her estranged daughter-in-law, Menaka Gandhi. The will was published after Rajiv Gandhi presented it at a court to certify it.

As per the Will, bulk of Indira Gandhi’s estate was a farm and a farmhouse under construction in Mehrauli, worth $98,000, which was to be divided equally among the three grandchildren. They were also given cash, stocks and bonds amounting to around $75,000, along with copyrights to books written by Indira Gandhi and Jawaharlal Nehru. Indira Gandhi’s antique articles and personal jewellery worth around $2,500 was left to Priyanka Gandhi alone.

All three recipients were minors at that time, therefore Rajiv Gandhi and Sonia Gandhi were given the responsibility of handling the property till they became adults.

While India had inheritance tax for over three decades, the Gandhi grandchildren didn’t have to pay any tax on this inheritance because the tax regime was abolished just a month ago before the Will was executed.

The Will was published on 2 May 1985 and then executed after Rajiv Gandhi govt abolished the Estate Duty Act in his first budget. The UPI report from 2 May 1985 said, “Under a finance bill that took effect April 1, all death duties in India have been abolished and no inheritance tax will be assessed on the Gandhi estate.”

Ayodhra Ram Mandir special coverage by OpIndia

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OpIndia Staff
OpIndia Staff
Staff reporter at OpIndia

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