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A recent reference to inheritance laws in the United States by Congress leader Sam Pitroda has ignited a political firestorm in India. While the Congress party has distanced itself from the remark, the BJP has seized the opportunity to bolster its narrative against Rahul Gandhi and his political advisors.
The controversy arose when Pitroda, a long-time Gandhi family advisor, discussed inheritance taxes during an interaction in the US. He brought up the subject while criticizing the Indian government’s focus on tax collection, suggesting that the authorities should instead concentrate on generating wealth and employment.
Pitroda’s remarks have reignited the debate around inheritance taxes, a concept that exists in some US states but not at the federal level in India.
What are inheritance taxes in the US?
In the United States, an inheritance tax is a state-level tax imposed on the money or property inherited from a deceased person’s estate. Unlike the federal estate tax, which is paid by the estate itself, the beneficiary is responsible for paying the inheritance tax.
Currently, the US federal government does not impose an inheritance tax, and only six states enforce one: Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. Moreover, many beneficiaries are exempt from paying this tax, even if they reside in one of these states.
Inheritance tax rates vary widely across states, ranging from less than 1% to as high as 20% of the inherited property and cash value.
How do inheritance taxes function?
After the deceased has allocated assets to the beneficiaries, the inheritance tax kicks in. The tax amount is calculated separately for each beneficiary, who is responsible for paying it.
For example, if a state imposes a 5% tax on inheritances exceeding $2 million and a beneficiary inherits $5 million, they would be taxed on the amount exceeding $2 million, which is $3 million. In this case, the tax liability would be $150,000.
While the BJP has seized upon Pitroda’s remarks to accuse the Congress of harboring plans to introduce an inheritance tax in India, the opposition party has distanced itself from the statement, asserting that it is not part of their economic agenda.
The political storm surrounding Pitroda’s US inheritance law reference has reignited debates around wealth distribution, taxation policies, and the contrasting economic visions of India’s major political parties.
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