Question

Consider the following statements.

a) The wealth tax was first levied in 1957.

b) Estate duty was first imposed in 1953 and abolished in 2016.

c) The gift tax was imposed in April 1958 as a complement to estate duty, wealth tax, and expenditure tax.

Which of the statement/s is /are incorrect?

1. a and b
2. a only
3. b only
4. b and c

Answer 1

Correct Answer - Option 3 : b only

The correct answer is b only.

• Since independence, the Central government has imposed certain taxes on wealth, the inheritance of wealth, and gifts.
• The objective was to reduce inequality and wealth in the country.
• However, they never became significant because of ineffective implementation and extensive evasion.
• Wealth tax:
  • Levied on accumulated wealth or property of every individual.
  • The tax was abolished in the 2016 budget.
• Estate duty:
  • It was imposed on the estate of a person which was inherited by him.
  • The rate ranged from 4 to 40% of the value of the estate.
  • It was imposed and collected by the central government but proceeds passed on to states.
  • It was abolished in March 1985 as the yield was too low.
• Gift tax :
  • Imposed in April 1958.
  • Charged and collected every financial year on gifts received during the previous year.
  • Again abolished in 1998 due to low yield.