In returning home as Non-Resident Indians (NRIs), it becomes necessary to be aware of inheritance laws in order to ensure a seamless transfer of assets. Indian succession laws may become complex involving both Indian and foreign assets. In this blog post, the necessary facts about Indian succession laws, the effect of which exists for NRIs, and the manner of future planning will be made easy to understand.
Legal Framework Regulating Succession in India
India is a multi-religious nation with a legal framework regulating succession on the basis of religion. The following is an overview of the major laws:
- Hindu Succession Act (1956): This act is applicable to Hindus, Sikhs, Jains, and Buddhists. This act regulates property succession in the event of a person’s death intestate. Intestate refers to dying without a will. The legal heirs such as children, spouse, and parents would inherit property in such a situation.
- Muslim Personal Law: inheritance among Muslims is decided on the basis of Sharia law, and shares are already predefined. It mostly goes to the children, wives, and parents, and members of the extended family can also receive shares.
- Indian Succession Act (1925): This concerns Christians, Parsis, and Jews. The assets are directed according to the wishes of the deceased if a will exists. Otherwise, it follows the inheritance rule under the act.
You must know under which law you fall in order to start sound estate planning as an NRI.
Importance of Having a Will
A will is among the most important documents to make sure that your assets are distributed the way you desire. Here’s why:
- Avoiding Legal Disputes: A will avoids possible dispute among family members while transferring assets.
- Distribution of Assets: You can determine how your properties, investments, and precious belongings are passed on to inheritors.
- Managing Both Foreign and Indian Assets: NRIs possess foreign assets. A properly drafted will facilitates easy settlement of foreign as well as Indian properties.
Creating a clear and valid will is the best means of securing your family’s future and preventing prolonged court wars.
Joint Ownership and Nominations
Joint ownership and nominations are of great use for NRIs in managing assets effectively:
- Nominations: Other money products such as bank accounts, life insurance, and mutual funds enable you to nominate nominees. Nominations are easy with which to pass on wealth, but the nominee is only a trustee of the wealth. The legal heirs can take their share, so it is extremely important to leave a will.
- Joint Ownership: Joint ownership of property or assets jointly in the names of the joint owners can ensure that the assets can be accessed directly by the surviving co-owner without any need for court procedures.
Nominations and joint ownership add another level of planning but must be backed by effective estate planning documents.
Inheritance Tax and Wealth Tax Considerations
India doesn’t have any inheritance tax but has the following taxation factors to consider for NRIs:
- Capital Gains Tax: In the case of inherited property sold by the successor, capital gains tax may be charged. The tax rate will depend on the length of time for which the asset was held.
- Wealth Tax: Although India repealed wealth tax in 2015, NRIs need to ensure the tax incidence in the country where they have foreign assets.
- Gift Tax: If you are gifting assets to relatives before your death, there are some restrictions. Gifts to immediate relatives are exempted, but gifts to others over INR 50,000 can be taxed.
Knowing these taxes is important to prevent financial burdens on your beneficiaries and heirs.
Repatriation of Inherited Property as an NRI
If you are an NRI and inherit property in India, you might want to repatriate it to your home country. Here’s what you should know:
- Repatriation of Funds: NRIs can repatriate a maximum of USD 1 million in a year by way of sale proceeds of inherited assets or property after obtaining tax clearance.
- Foreign Exchange Management Act (FEMA): FEMA regulations require that NRIs follow special procedures while repatriating foreign assets. Documentation through legal documents such as proof of inheritance is necessary.
Estate planning correctly will make asset management and passing of assets so simple for your beneficiaries.
Conclusion
It is important that NRIs remain aware of inheritance in India since it will guarantee that their property is passed according to their wish and beneficiaries won’t be faced with any legal issues. A will, tax awareness, and planning for repatriation are important steps to secure your assets. Proper planning by NRIs can make property transfer to the next generation free from hassle and smooth.
FAQs
- Can NRIs inherit property in India?
Ans- Yes, NRIs can inherit property in India from a resident or non-resident relative according to Indian inheritance laws. - Does an NRI need a will in India?
Ans- Yes, with a will in India, your Indian assets are dealt with according to your preference and avoid legal disputes. - What happens if an NRI dies intestate?
Ans- If an NRI passes away intestate, the laws of inheritance (Hindu Succession Act, Indian Succession Act, or Muslim Personal Law) will govern the distribution of the property. - Is there an inheritance tax in India?
Ans- No, there is no inheritance tax in India at present, but other taxes like capital gains tax can be levied on the sale of inherited property. - Can NRIs repatriate inherited funds from India?
Ans- Yes, NRIs are allowed to repatriate USD 1 million annually from the proceeds of sale of inherited property under FEMA regulations. - What is the position of a nominee in Indian law of inheritance?
Ans- The nominee is a custodian but legal heirs have rights to claim the share of inheritance. - Are foreign assets included under Indian laws of inheritance?
Ans- Properties outside India are governed by foreign countries’ laws relating to inheritance and may require the NRIs to have Indian as well as foreign wills. - Can NRIs jointly own properties in India?
Ans- Yes, immovable property may be jointly held by NRIs with Indian residents or non-residents, thus allowing for straightforward transfer of ownership at death. - What are the taxes to be paid when an NRI inherits and sells properties in India?
Ans- Capital gains tax is levied on sale of property that has been inherited. The tax is based on the holding period and the nature of property. - Can NRIs gift property to relatives in India?
Ans- Yes, NRIs are permitted to gift property to relatives. Gift tax rules are applicable for non-relatives if the gift amount is more than INR 50,000.
Disclaimer: The information provided here is for educational and informational purposes only and should not be construed as financial, legal, or tax advice. Consult with a qualified professional before making any investment decisions. We do not accept any liability for errors or omissions in this information nor any direct, indirect, or consequential losses arising from its use.
