Despite the bona fide objective of the duty, it faced a lot of criticism from multiple sectors throughout the three decades it was in force. The Act was widely perceived to be a complex piece of legislation, primarily owing to the different valuation rules for different kinds of property. The complexities resulted in increased number of litigations relating to determination of principal value of the property.
Further, estate duty and wealth tax were together seen as double tax on the same base and were thus criticized as being onerous. Collection of tax was meagre and it was reported to constitute a miniscule percentage of the total direct tax collected by the central government during the relevant years. On the other hand, the administration cost incurred by the government remained high, inter alia , on account of the large number of litigations.
Practice of holding benami properties was prominent and it was important to put in place an efficient legislation in order to curb the practice. A lot of inherited properties remained illegitimately concealed from the purview of tax and therefore the rate of tax collection was low.
One of the most important factors which led to its pitfall was the high cost and time involved in the administration of collection of estate duty compared to the actual estate duty collected. Apart from the high administrative costs involved in implementation, imposition of the estate duty was alleged to have caused disruption to the financial economy of Indian families. It is interesting to note countries like the United States of America, United Kingdom, Canada and France also impose a tax on inheritance.
In these jurisdictions, the basic rationale behind imposition of a tax on inheritance is to reduce social inequality and to facilitate economic redistribution of wealth in addition to the tax being an additional source of revenue for the government. In England, estate duty was introduced in as a 'back tax' and the principal taken into consideration for its imposition was that estate duty represented the duty due from the estate to the State.
It was believed that the title of the State to a share of the accumulated property of the deceased is anterior to that of the interest to be taken by those who are to share it. Inheritance tax is also viewed as a tool to decrease inflation in residential property as some property may be sold to pay the tax, thereby bringing more property into the market which would align the supply of property with the increasing demand.
In the USA, inheritance tax is seen as a means to prevent accumulation of wealth in a few hands and to provide equal opportunities to the citizens irrespective of their social or economic backgrounds. A brief outline of the applicable law in relation to inheritance tax in the aforementioned countries is as follows:.
The rate is generally dependent on the value of inheritance. In some countries it is also dependent on the relationship of the beneficiary with the deceased as seen in the above example of France. In , the minister of state for finance expressed that he was in favour of bringing back the inheritance tax in some form. Further, there have been recent reports in which suggest that the government intends to bring back the inheritance tax.
While the recent budget for the year did not bring about any such provision, these speculations refuse to die down and the market sentiment continues to indicate that estate duty will be imposed in the near future. Considering that the intention behind reintroducing estate duty will be to avoid accumulation of wealth in the hands of few and to bring about economic equilibrium, imposition of estate duty may seem desirable. However, given that gift tax is currently applicable to several kinds of transfers without consideration, In the event the government reintroduces estate duty or any other form of inheritance tax, it must be ensured that such tax does not lead to double taxation over and above gift tax.
This is because, in wake of a tax on inheritance, Indian promoters may give up their residential status or business operations may move overseas as tax planning measures. You can choose to set these optional video cookies that are described below.
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YouTube may set cookies directly according to YouTube's own cookies policy. The relevant forms must be submitted to:. Next: Threshold and rates. Any person to whom an assessment has been issued may appeal to the High Court within 3 months from the date of issue of the assessment on the ground that Payment or giving security for the duty claimed is a condition of an appeal.
The Commissioner has power to postpone payment and the High Court or the District Court hearing the appeal may also dispense with the payment of duty as a condition of the appeal on the ground of hardship to the appellant. Affidavits and Accounts are required to be submitted to the Estate Duty Office and duty thereon shall be due on the delivery thereof or on the expiration of six months from the death, whichever happens first. If delivery is delayed beyond twelve months from the death, the rate of duty or the amount of duty will be doubled unless there is reasonable excuse for the delay.
In the great majority of cases, a Certificate of Exemption will be issued within six weeks, together with an official letter advising the applicant exactly what he should do next. This procedure does not apply where the estate includes an interest in land, an interest in a business, shares except shares quoted on Stock Exchange , or where litigation is contemplated. The applicant should approach the Probate Registrar to enquire whether his office would informally administer the estate.
However, these simplified procedures do not apply where the estate consists of any interests in business or land. Please note that the rate of duty is applicable to each and every component of the estate.
After the date of death, the deceased estate comes into existence. The assets of the deceased person will be held by the deceased estate until the liquidation and distribution account has lain for inspection and become final under section 35 12 of the Administration of Estates Act, after which the assets will be either handed over to the heirs or delivered to the trustee of a trust estate.
Income, which accrues to the estate after the death of the deceased but before the distribution of the assets to the beneficiaries, is dealt with under section 25 of the Income Tax Act.
It is normally the responsibility of the Executor to pay the duty as levied on the property of the deceased. However, there are instances in which the estate duty is payable directly by the person who is receiving the property.
For example, where a policy is payable directly to a beneficiary, the Estate Duty attributable to such policy is payable by the beneficiary in other words, this portion of the Estate Duty will not be paid by the deceased estate.
Estate Duty is due within 1 year of date of death or 30 days from date of assessment, if assessment is issued within 1 year of date of death. For more information on Estates, please refer to the Estates webpage. The executor will calculate the Estate Duty payable when preparing the liquidation and distribution account. For the valuations to be done, valuation packs together with the Valuation Pack Checklist, must be provided to the Share Valuations Team at the following address: [email protected].
Double taxation may arise if the same assets of the deceased person are subject to Estate Duty in South Africa as well as the equivalent thereof in the foreign country. For more information, click here.
Where double taxation on Estate Duty arise and no Estate Duty agreement exists between South Africa and the foreign country, relief for the double taxation must be sought under domestic rules. Businesses and Employers.
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