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Upon an individual's death, inheritance or succession is the distribution of assets to another person or persons. From investing abroad to transferring ancestral homes in India, inheriting assets as a Non-Resident Indian (NRI) has its own tax implications. In the same way for resident individuals, there is no tax on the assets acquired at the time of inheritance for NRIs in India. However, income arising in India from the inherited assets will be subject to tax. Let us discuss this in detail.
Unlike many countries, India's tax structure does not include a specific levy on inherited assets. Inheritance tax, distinct from income or capital gains tax, directly targets the value received through inheritance. While other taxes may apply to income generated from inherited assets or potential capital gains upon their sale, the act of inheriting itself does not trigger any tax burden in India.
This absence of inheritance tax in India presents a notable advantage for NRIs inheriting property or assets within the country. They can receive their inheritance without facing any immediate tax obligations solely due to inheriting.
There are no limitation to NRIs while inheriting property. This means, NRIs can inherit (from a resident Indian or another NRI) and hold any number of immovable properties in India including commercial, residential, agricultural including farmhouses in India.
Under the Foreign Exchange Management Act (FEMA), Non-Resident Indians (NRIs) can inherit immovable property in India from Indian residents without requiring permission from the Reserve Bank of India (RBI). Notably, this inheritance is exempt from income tax in India. Additionally, India does not impose inheritance taxes, making the process even more advantageous for NRIs.
Indian inheritance laws differentiate between two primary categories of property: movable and immovable.
The Foreign Exchange Management Act (FEMA) regulates various financial aspects for NRIs in India, including property ownership. Fortunately, NRIs are permitted to inherit property within the country as per FEMA guidelines. This inheritance can involve both movable and immovable assets.
It's essential to reiterate that there is tax liability for NRIs on inheritance in India. This implies that NRIs receiving assets through inheritance are not subject to any immediate tax burden solely due to inheriting.
While inheriting itself doesn't trigger taxation, NRIs should be aware of potential tax implications when deciding to sell their inherited property. Capital gains tax might apply based on the difference between the inherited property's market value at the time of inheritance and the sale price.
If an NRI inherits property that generates income, such as rental income from a building, they become liable to pay income tax on that income in India. NRIs can avail of tax treaties between India and their country of residence to potentially reduce their tax burden.
Consulting a tax professional is vital for NRIs to determine the exact tax implications based on the specific circumstances surrounding their inherited property and their residency status. Our tax experts can guide you through the intricacies of capital gains tax calculations and any potential tax benefits or exemptions available under the current tax regime. Book Consultation Today!
Yes, an NRI can sell the property to a resident Indian , an NRI or a PIO. The only exception here is that an NRI holding agricultural land, plantation land or farm house may sell these properties only to a person resident in India and who is a citizen of India.
PIO can sell property in India to a person resident in India or an NRI. In case a PIO wants to sell to another PIO, he will need to get prior approval from RBI.
While inheriting property in India itself doesn't attract tax for NRIs, it's crucial to understand potential tax liabilities that might arise in specific scenarios:
Navigating NRI inheritance laws in India, consult with tax experts.
Inheritance of property incurs no taxation, yet any income generated from it, such as rental income, is liable to taxation. When selling immovable property, it's crucial to account for capital gains tax implications.
In our nation, there are no inheritance taxes to pay, as the law abolishing them was enacted in 1985. Hence, there's no need for concern regarding inheritance tax when engaging in estate planning. Nevertheless, it's important to note that the absence of this tax doesn't eliminate other potential tax implications.
Non-resident Indians (NRIs) are permitted to sell inherited property to an Indian resident without requiring permission from the Reserve Bank of India (RBI). However, selling to a non-resident necessitates approval from the RBI. Capital gains tax may be applicable, contingent upon the property's acquisition date.
In India, there are no inheritance taxes, meaning there are no taxes imposed when you inherit property or assets. Nevertheless, if you decide to sell the asset or earn any income or profit from the inherited property, it is essential to begin declaring the inheritance on your tax returns.
