Wednesday, 24 January 2018

Inheritance tax may be reintroduced in India by Centre soon; How it can impact you

Inheritance tax may be reintroduced in India by Centre soon; How it can impact you

To boost tax revenue, the government is planning to reintroduce inheritance tax in India, which may be introduced in the coming Budget.

By: Sanjeev Sinha | Updated: October 9, 2017

Developed countries like the UK and the US have high inheritance tax and that is effective there because they have a very strong social security system in place.

Some have proposed that India needs to address increasing inequality by increasing its tax-to-GDP (gross domestic product) ratio.

How a “low tax to GDP ratio” affects India?


As per 2015 data, India has low Tax or Revenue to GDP ratio at around 18%. It is substantially low in comparison to US (27%), UK (39%), , France(45%), Germany (41%)and BRICS constituents viz., Brazil (34%), Russia (20%), China(22%), South Africa(27%).
Growth not inclusive. Many poor people coexisting with super rich.
Poor revenue to GDP Ratio while GDP is on the rise, will impacts India as under :
1) Rise of social inequalities - The economy will suffer from wide gap between per capita income of rich and poor.
2) Rise in Interest burden - The funding for Public works programme would be done more out of borrowings. This will increase interest burden. Interest payment means lesser appropriation of funds for Capital Asset building.
3) Inflation - Lesser contribution from tax payers means generating money supply partly through printing of currency.
4) Higher Interest Rates - Inflation will put pressure on interest rates.
5) Higher participation of MNCs and investment of foreign funds in infrastructure, Power generation, technology, etc . Domestic companies will have to face tough competition from MNCs.
6) Rupee will not strengthen in medium term
7) Pressure to contain Fiscal Deficit & Current Deficit.     


No comments:

Post a Comment