Rajiv Gandhi abolished inheritance tax to save family wealth, says PM Modi

Prime Minister Narendra Modi on Thursday claimed that former premier Rajiv Gandhi abolished the inheritance tax in 1985 after the death of his mother Indira Gandhi to save her wealth from going to the government, continuing his attack on the Congress on the wealth redistribution issue.

Addressing an election rally in Madhya Pradesh's Morena city, Modi alleged that Congress wanted to bring back the inheritance tax or estate duty, a levy imposed on inherited movable and immovable assets.

"Listen with your ears wide open about the sins that the Congress has committed. I want to put forth an interesting fact. When sister Indira Gandhi passed away, there was a law under which half the portion of the wealth used to go to the government. There was a talk then that Indiraji willed her wealth in her son Rajiv Gandhi's name. To save the money going to the government, then PM Rajiv Gandhi abolished the inheritance tax,” he said.

Responding to Modi’s claims, the Congress termed them “lies” intended to divert attention from real issues. Congress president Mallikarjun Kharge, in a letter, sought time from Modi to “explain” to him the Congress manifesto. The party challenged the prime minister to point out where it had stated in its manifesto that it would redistribute wealth or impose an inheritance tax.

In a social media post, Congress leader Jairam Ramesh said former prime minister Indira gave away her ancestral property in Allahabad in 1970 to the Jawaharlal Nehru Memorial Fund. The Congress general secretary claimed that Modi "symbolises" 'asatyamev jayate'. He claimed that the prime minister had stopped raising slogans of '400 paar' and 'Modi ki Guarantee', and was using a new language of polarisation.

Ramesh shared an excerpt from the speech of then Finance Minister VP Singh's Budget speech delivered on March 16, 1985, which proposed the abolition of estate duty. According to Singh’s speech excerpt, the then finance minister termed the existence of wealth tax and estate duty as procedural harassment. Singh said both laws applied to the property of a person, the former applying to their property before death and the latter after their death.

“The existence of two separate laws with reference to the same property amounts to procedural harassment to the taxpayers and the heirs of the deceased who have to comply with the provisions of two different laws,” Singh had said.

"Having considered the relative merits of the two taxes, I am of the view that estate duty has not achieved the twin objectives with which it was introduced, namely, to reduce unequal distribution of wealth and assist the states in financing their development schemes," he had said.

While the yield from estate duty is only about Rs 20 crore, its cost of administration is relatively high, Singh noted, as he announced the abolition of estate duty.