In recent years, debates around wealth inequality and fiscal policy have gradually returned to public discussion. Yet, one legal question continues to receive relatively little attention in India: whether the tax system should treat the transfer of very large fortunes across generations entirely as a private matter.
India once addressed this issue through the Estate Duty Act, 1953, which imposed a duty on property passing upon death. The law remained in force for several decades before being repealed in 1985. At the time, policymakers pointed to administrative complexity, frequent valuation disputes and relatively modest revenue collections.
The economic circumstances surrounding that decision were very different from those that exist today.
In the mid-1980s, India’s capital markets were still developing and large-scale private wealth was relatively limited. Since then, the country has undergone a profound economic transformation. Liberalisation, deeper financial markets and the rise of globally competitive enterprises have created unprecedented levels of private wealth.
As these fortunes mature, succession planning and inter-generational transfers inevitably become more prominent. This raises an important policy question: how should the legal system approach the transfer of exceptionally large estates from one generation to the next?
Many advanced economies continue to address this issue through inheritance or estate taxation. Countries such as the United States, the United Kingdom, and Japan maintain such frameworks, usually accompanied by substantial exemption thresholds. These thresholds ensure that ordinary family assets remain unaffected while very large estates fall within the scope of taxation.
The rationale for such taxes varies across jurisdictions. In some cases, the objective is revenue generation. In others, the emphasis lies on maintaining economic mobility and preventing excessive concentration of wealth across generations.
In India, however, proposals relating to inheritance taxation often trigger strong opposition. Critics argue that such measures could discourage entrepreneurship, complicate succession planning for family-owned businesses or encourage capital migration to more favourable jurisdictions. These concerns deserve careful consideration.
At the same time, tax policy has evolved considerably since the abolition of estate duty. Modern fiscal frameworks allow for far more targeted and calibrated approaches. A threshold-based inheritance tax, for instance, could apply only to estates above a very high value while leaving ordinary inheritances entirely untouched.
India has also experimented with other mechanisms intended to address broader social disparities. One notable example is the corporate social responsibility framework introduced under the Companies Act, 2013, which requires certain companies to allocate a portion of their profits toward socially beneficial initiatives.
CSR, however, functions primarily as regulated corporate philanthropy. Questions relating to inherited wealth fall into a different category. They concern the long-term structure of economic power and the way large private fortunes move across generations within the legal system.
Any reconsideration of inheritance taxation must, therefore, proceed cautiously. India’s economic progress has been driven in large part by entrepreneurship, risk-taking and private investment. Public policy should continue to encourage these forces.
At the same time, the legitimacy of fiscal institutions often depends on broader perceptions of fairness. When substantial wealth passes across generations without any fiscal consideration, societies eventually confront difficult questions about opportunity and mobility.
India’s tax system has repeatedly evolved in response to changing economic conditions. The introduction of the Goods and Services Tax stands as one of the most significant examples of institutional reform in recent decades.
Within that broader context, revisiting the legal and policy implications of inheritance taxation should not necessarily be viewed as radical. Even if the eventual conclusion favours retaining the current framework, the discussion itself can contribute to a more informed policy debate.
As India’s economy continues to expand and private wealth deepens, questions surrounding inter-generational transfers are likely to arise more frequently. Engaging with the issue thoughtfully - and without ideological rigidity - may ultimately strengthen the credibility of India’s fiscal and legal institutions.
Jitendra Mohananey is a practicing advocate.