India: Estate Taxes: Should You Be Concerned?

Last Updated: 14 September 2017
Article by Metasis Legal

What is an Estate Tax?

An Estate Tax is levied on the inherited portion of an estate of an heir if the value of such an inheritance exceeds an exclusion limit which has been set by the Law of the land. Different countries have several variations of it, and a different nomenclature, ranging from death tax, transfer tax, succession tax to inheritance tax. While there may be different persons liable to pay the same, the bottom line is that all these taxes are broadly similar, generally being triggered by death. In all cases, the inherited estate is not received in entirety by the beneficiary, but a sizable chunk of it has to be paid to the State.  Now the liability of payment, i.e. who will pay the tax, may be different in each case.  Estate taxes are levied on the net value of property owned by a deceased person on the date of their death. In contrast, inheritance taxes are levied on the recipients of the property. All these taxes are generally paired with some kind of gift tax so that they cannot be avoided by simply transferring the property prior to death.

Usually, there are exemptions upon the estate being transferred to the surviving spouse, but again, upon the demise of the surviving spouse, more often than not, these taxes catch up.

In some countries, the applicable inheritance tax could be as high as 55% of the Estate post permissible deductions, making it essential for the Estate owner to plan well in advance.

Estate or Inheritance tax regimes in some large countries:

USA: The US imposes an estate tax on the transfer of a decedent's worldwide estate for its citizens and residents – which means in case of persons having a US citizenship the worldwide estate is liable to pay the estate tax irrespective of them being domiciled or residents in USA. For an individual who is neither a US citizen nor a US resident (i.e., a non-resident alien), the gross estate includes only US situs property (including real estate and financial instruments) owned at death.

The rate of Estate taxes in USA peaks at 40%, with the estate and gift tax exemption threshold being $5.49 million per individual for 2017. The exemption doubles to $10.98 million for married couples filing joint tax returns. Besides the Estate tax being a federal tax, several states have a state-level estate tax over and above the federal limit.

United Kingdom: UK has a unified regime of estate and gift tax called inheritance tax (IHT). IHT applies to the value of an individual's estate when he or she dies (in which case he or she is deemed to make a transfer of the whole estate immediately before such time) and to certain transfers or gifts made during the individual's lifetime. The tax applies on the basis of the loss to the donor's estate that arises by reason of the transfer of value.

The taxation of individuals in the UK is largely determined by their domicile status or at times by their residential status, although residence is less important for IHT. IHT is levied on the worldwide estate of a decedent who was domiciled in the UK. While UK recognises the concept of domicile as a country considered as permanent home, IHT is applicable (with some variations) to deemed domiciled persons as well. The deemed domiciled and non-domiciled taxation laws have undergone significant changes in 2017, requiring careful reassessment of even existing planning in place, if any.

IHT is also levied on the UK sited assets of a person who was not domiciled in the UK. One should be aware and plan well before eyeing and buying that hot London property!

The standard rate of the Inheritance tax is set at 40% which is charged on the estate which is above the threshold, which is 325,000 pounds currently. If the estate is given to the children or grandchildren, the threshold increases to 425,000 pounds.

Canada: Canada does not have an Estate Tax but, after the death of a person, their estate is considered to have devolved upon their spouse and if there is no spouse then in that case, the deceased is considered to have sold all of his/her property at fair market price immediately before his death. It often results in the recognition of some amount of gain or loss which is included in computing income in the year of death. These deemed gains are then taxed at the applicable capital gains tax rates.

The taxation of individuals in Canada is determined by residence. The deemed disposition at death applies to the worldwide assets of all Canadian residents at the time of death. In addition to the judicially developed tests, the Canadian Tax Act has provided statutory tests that may deem a person to be a Canadian resident. In the case of an individual, the key rule is that a person is deemed to be a resident for any tax year in which he or she spends 183 or more days in Canada. Separate rules apply if the person is considered a resident of more than one country.

Non-residents may also be liable for tax at the time of death if they own taxable Canadian property.

Situation in India:

Currently, there is no Estate Tax levied in India. India had the Estate Tax regime from 1953 to 1985. However, it was removed in 1985 with the realisation that Estate Tax had failed to bring equilibrium in the society.4 Prior to removal, estate duty was payable on a slab basis ranging from 7.5% to 40% of the principal value of the estate.

It is noteworthy that since past few years, there has been widespread speculation that Estate tax will be reintroduced in India, but no formal proposal has yet been tabled before the Parliament.

Is there a silver lining?

Yes, if planned well in advance, the Estate or inheritance taxes may be legitimately minimised to a significant extent. Depending on each country's tax incidence and the assets involved, the planning could vary from simple gifting to setting up of intricate structures weaved in to bring tax efficiency. Such cases should be evaluated by experts who are well versed with the consequences of the alternatives chosen.

When should you be concerned:

With the global tax scenario becoming dynamic as ever and governments getting keener to shore up their fledgling tax kitties, it is of utmost importance that one remains aware that certain scenarios can attract Estate or inheritance taxes and plan in advance for the same. We are listing below a few situations in which one should be more careful and rule out the applicability of any of these levies, or alternatively, plan towards most efficient pay-outs:

  • You have, or plan to acquire the citizenship of some other country
  • You propose to buy a property in other country
  • You desire on doing business in some other country
  • Your spouse or children have a foreign citizenship
  • Your children are studying abroad and may settle down outside their home country
  • You are employed in a foreign country
  • You are likely to inherit property from someone who is staying abroad
  • You wish to bequeath your property to someone who is staying abroad  
  • Your legal heirs are settled outside your home country
  • You propose to settle abroad while continuing to be a citizen of your country

This is not an exhaustive list, but more likely scenarios where if not planned, the estate may eventually be liable for taxes, instead of it passing on to your rightful heirs in entirety. In the event of two or more jurisdictions involved, a better way would be to engage with experts having an understating of multiple jurisdictions to bring out overall tax efficiency in a person's estate.






The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Shardul Amarchand Mangaldas & Co
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Shardul Amarchand Mangaldas & Co
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions