Inheritance Tax in India: Current Rules & Future Possibilities
Introduction
Inheritance tax in India—also called estate tax or death duty—is a topic that often sparks debate among tax professionals and policymakers. Though India currently does not levy inheritance tax, there’s growing speculation about its possible return, especially in light of rising wealth inequality and global economic trends.
In this blog, CA Sweta Makwana & Associates walks you through the current legal framework, international practices, and the future possibilities of implementing inheritance tax in India.
What Is Inheritance Tax?
Inheritance tax is a tax levied on the estate or assets passed down from one generation to the next. This tax is generally paid by the heirs or beneficiaries, based on the value of assets inherited.
While countries like the UK, USA, Japan, and South Korea impose inheritance or estate taxes, India abolished this tax in 1985.
Is There an Inheritance Tax in India?
No, as of 2025, there is no inheritance tax in India. When someone inherits property, gold, shares, or any other assets, they do not pay tax on receipt of such assets.
So, what is taxed?
Although inheritance is not taxed, any income earned from the inherited asset (like rent, capital gains, dividends, etc.) is taxable under the Income Tax Act.
A Brief History: When India Had Inheritance Tax
India introduced an Estate Duty Act in 1953, which imposed tax on the market value of the deceased person’s assets. However, it was:
- Complicated to administer
- Low in revenue generation
- Easy to evade
Consequently, the Estate Duty was abolished in 1985 under the Rajiv Gandhi government, citing administrative inefficiencies and poor returns.
Why Is the Topic Resurfacing in 2025?
With global debates on wealth taxation, especially post-COVID and amid rising inequality, there are murmurs about reintroducing inheritance tax in India. Notably:
- OECD and IMF have recommended inheritance taxes as tools to reduce inequality.
- The top 1% in India owns over 40% of the nation’s wealth, according to Oxfam 2024 report.
- Budget discussions often include wealth redistribution tools.
While there is no formal proposal yet, experts believe the inheritance tax could be reintroduced in the future, especially targeting ultra-HNIs.
Global Comparison: Inheritance Tax Rates Around the World
| Country | Max Rate (%) | Exemption Threshold |
|---|---|---|
| Japan | 55% | ¥30 million + ¥6 million/heir |
| South Korea | 50% | KRW 500 million |
| UK | 40% | £325,000 |
| USA (Estate Tax) | 40% | $13.61 million (2024) |
| France | 45% | €100,000 |
India remains one of the few large economies without inheritance tax.
Pros and Cons of Introducing Inheritance Tax in India
Pros
- Helps in reducing wealth inequality
- Generates revenue for government spending
- Encourages charitable bequests
Cons
- May lead to tax avoidance and asset shifting
- Adds compliance burden
- May discourage savings and investments
Future Possibilities & What Taxpayers Should Watch For
While no formal bill exists yet, here’s what experts and analysts believe could happen if inheritance tax is reintroduced:
- It may apply only to large estates (e.g., assets above ₹10 crore)
- Could come with exemptions for family homes and farms
- Trust structures and succession planning will become critical
What Can You Do Now?
Even without inheritance tax, it’s essential to:
- Draft a clear Will to avoid disputes
- Consider trusts or holding companies for succession
- Keep asset valuations and ownership documents updated
- Consult with a chartered accountant or estate planner
Final Words
As of now, inheritance tax in India doesn’t exist, but it’s wise to stay informed. If you’re building intergenerational wealth or planning your estate, work with professionals like CA Sweta Makwana & Associates to ensure your financial legacy is secure and tax-efficient.