MUMBAI: The government is considering the levy of an inheritance tax on high net worth individuals, some of whom are already preparing to insulate themselves from such a liability by forming family trusts. The government has sought feedback, including recommendations, on the proposed re-introduction of inheritance tax, also known as estate duty, two people aware of the development said.The tax could range from 5% to 10% and would apply only to families with a certain net worth, said one person. The views of taxation lawyers and experts were also sought and the proposed tax could be introduced in the next budget. Industry experts said many high net worth individuals, anticipating such a tax, are making arrangements to insulate their assets by forming family trusts.“In recent times, there has been a buzz in HNI circles that to boost revenue, the government may reintroduce estate tax (inheritance tax) and therefore trust structures have been actively considered and deployed,” said Praveen Bhambani, a partner at PwC India . An email query sent to the finance secretary and the Central Board of Direct Taxes on October 3 did not elicit any response. India had 617 individuals with wealth of c1,000 crore ($154 million) or more as of July 31, according to the Hurun Research Institute , a luxury publishing group based in Shanghai. Currently, there is no tax in India on bequeathed assets.India had inheritance tax from 1953 and discontinued it in 1986. Family trusts would fall outside the scope of inheritance tax — if it is introduced —because there is no transfer in ownership of assets, only a change in the trust shareholding. This is why more wealthy people want to form a trust, experts said. However, many family trusts typically hold only bank accounts and equity shares and not immovable property, experts said.“Since most family trusts do not transfer immovable assets in the trusts due to the additional expense of having to pay stamp duty, if such a tax is introduced these assets would be taxed when bequeathed or transferred via gift.In most countries, the gift tax exemptions limits are clubbed with inheritance tax exemption limits and the same would be applicable here otherwise the window of tax avoidance would be open.” said Sandeep Nerlekar, founder of Terentia Consultants, an estate planning firm.In many cases, family trusts are being created to skirt the bankruptcy code or tough bad debt guidelines, experts said. However, in several cases, lenders are seeking bank guarantees from family trusts for additional advances. Some family trusts are also being formed outside India to circumvent local taxation regulations.