Generation-Skipping Tax (GST)

Generation-Skipping Tax (GST) – Generation-skipping tax (GST) is a federal tax imposed on the transfer of assets to beneficiaries who are two or more generations below the donor, such as grandchildren, rather than the immediate next generation (children). The purpose of this tax is to prevent the avoidance of estate or gift taxes through direct transfers to younger generations. This tax is levied in addition to any applicable estate or gift taxes and applies to both lifetime gifts and bequests made at death. Certain exemptions and thresholds may apply depending on the value of the transfer and the relationship between donor and beneficiary.

Example: If a grandparent transfers a property worth ₹1 crore directly to a grandchild, the generation-skipping tax is applied in addition to any estate or gift tax that may already be due.