What is Estate Duty / Inheritance Tax?
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Estate duty (or inheritance tax) is a tax levied on the property, money, or assets that a person leaves behind after death.
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It is collected before heirs (children, spouse, relatives) receive the inheritance.
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The rate of tax depends on the value of the estate and government rules.
Example 1: Estate Duty
Suppose Mr. X passes away and leaves property worth ₹5 crore.
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The government says estate duty = 10% of estate value above ₹1 crore.
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Tax = (₹5 crore – ₹1 crore) × 10% = ₹40 lakh.
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The heirs will receive only ₹4.6 crore (after paying tax).
Example 2: Inheritance Tax
In some countries, heirs directly pay tax on what they receive:
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Mr. Y leaves ₹2 crore to his daughter and ₹1 crore to his son.
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Tax rule: 20% inheritance tax.
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Daughter pays 20% of ₹2 crore = ₹40 lakh.
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Son pays 20% of ₹1 crore = ₹20 lakh.
In India’s Case
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Estate Duty was introduced in 1953 but abolished in 1985 (Rajiv Gandhi govt) because collection was low and people found loopholes.
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✅ Today, India does NOT have estate duty or inheritance tax.
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Heirs only need to pay capital gains tax if they sell inherited property later.
👉 So, estate duty = tax on entire estate before distribution.
👉 Inheritance tax = tax paid by each heir on what they inherit.