NRI Inheritance Laws & Taxation in India: A Complete Guide 🌟

 Non-Resident Indians (NRIs) often face challenges when inheriting property in India. Understanding the laws, taxation, and procedures involved is essential to avoid complications. This guide simplifies everything you need to know about NRI inheritance laws, with practical examples and easy-to-follow explanations.

---

Who is an NRI? 🌐

The term "NRI" (Non-Resident Indian) is not explicitly defined under any single law, but it can be understood based on:

• Income Tax Act, 1961: If an individual has not stayed in India for more than 182 days in the previous financial year, they are classified as an NRI.
• Foreign Exchange Management Act (FEMA), 1999: A person who has left India for employment, business, or permanent residence abroad is considered an NRI.

Types of Property NRIs Can Inherit 🏢

NRIs can legally inherit any type of immovable property in India, including:
✅ Residential property (flats, houses)
✅ Commercial property (shops, office spaces)
✅ Agricultural land and farmhouses (NRIs can inherit but not purchase)

However, inheritance from another NRI requires RBI approval if the inherited property was not acquired following FEMA rules at the time of purchase.

Inheritance of Movable & Immovable Assets 📄

1. Movable Assets (Bank accounts, stocks, jewellery, etc.)

Inheritance is governed by personal laws based on the deceased’s religion:

• Hindus, Buddhists, Sikhs, Jains → Hindu Succession Act, 1956
• Muslims → Muslim personal laws
• Others → Indian Succession Act, 1925 or Uniform Civil Code (in some states)

2. Immovable Property (Land, houses, real estate)

• Self-Acquired Property: Can be passed on through a Will.
• Ancestral Property: Follows succession laws, which vary based on religion and regional customs.

Transfer of Title for Inherited Property 👥

Documents Required:

• Will (registered or unregistered)
• Probate (mandatory in Kolkata, Mumbai & Chennai for legal confirmation of the Will)
• Succession Certificate (if there is no Will)
• Original Purchase Deed & Registration Documents
• Encumbrance Certificate (verifies no pending legal dues)
• Land Records (Khata, Mutation Certificate)

Repatriation of Sale Proceeds 💵

NRIs can repatriate (send money abroad) up to $1 million per financial year from property sales without RBI approval, provided:

• The property was legally acquired under FEMA.
• The acquisition was done through permissible payment modes (bank transfers, not cash).
• If the property is residential, repatriation is allowed for only two properties.

📃 Forms Needed:

• Form 15CA & 15CB (Form 15CB must be signed by a Chartered Accountant)

---

Taxation on Inherited Property 📚

1. Is There an Inheritance Tax in India?

🚀 Good News: India does not impose inheritance tax. However, any income (rent, capital gains) from inherited property is taxable.

2. Capital Gains Tax on Selling Inherited Property

• Long-Term Capital Gains (LTCG): If held for more than 2 years, taxed at 20%.
• Short-Term Capital Gains (STCG): If sold within 2 years, taxed as per income tax slabs.

🌪 Example: Rahul, an NRI, inherits a house bought by his father in 1990. If he sells it in 2025, the purchase date & price of his father is considered for taxation.

3. Tax Deduction at Source (TDS) on Property Sales

• If property held for more than 2 years, 20% TDS applies.
• If sold within 2 years, 30% TDS applies.

4. How to Save Capital Gains Tax?

• Section 54: Invest sale proceeds into another residential property.
• Section 54EC: Invest in NHAI or REC bonds.
• Section 54F: Exemption on non-residential property sales if investing in a house.

Power of Attorney (PoA) for Property Management 🏰

NRIs often use PoA for managing properties remotely. Types of PoA are as under explained through the flow chart:

 

🌟 Important Supreme Court Ruling: The Supreme Court ruled in Suraj Lamp & Industries v. State of Haryana that property cannot be sold using PoA alone—proper sale deeds are required.

🌐 NRIs can execute PoA through:

• Indian Embassy/Consulate (Legalization Method)
• Apostilization (Hague Convention Countries)          

 Conclusion 🚀

Understanding NRI inheritance laws is crucial for seamless property transfers and tax compliance. Whether you are inheriting a house, land, or movable assets, knowing the applicable laws, taxation, and documentation can help avoid legal hassles.

If you have specific inheritance queries, consulting a Chartered Accountant or legal expert can make the process smoother.