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One of the arguments made against inheritance tax is that it could discourage non-resident Indians from bringing their wealth back to India and could lead to outflow of wealth away from India to foreign jurisdictions.

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Besides, at a time when the economy is not in the best of shape, the government may not want to dis-incentivise capital formation by imposing an inheritance tax.

While there is some speculation that the tax could be re-introduced to shore up the government’s revenues, there are some operational roadblocks and risks that could impede its return.

One, inheritance tax — imposed on a person who inherits assets from someone who has died — could face hurdles in administration, similar to those seen with the erstwhile estate duty and wealth tax.

These include possible tax-avoidance measures such as using the Hindu Undivided Family (HUF) route to transfer assets within the family.

HUFs enjoy a separate tax status from that of the family members who are part of it.

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