Legal Implications of Inheriting Property in India as an NRI
Summary
- NRIs can inherit moveable and immovable property from their ancestors on equal footing with Indian residents.
- NRIs can inherit both residential and commercial property in India. In addition, they can also inherit agricultural land and farmhouse in India, which they cannot purchase otherwise.
- There is no tax liability on inheriting property in India, but if NRIs wish to sell the inherited property, they must bear the tax liability.
- Once NRI inherits the property through Will or natural succession, transferring and registering ownership title on your name becomes crucial to avoid future disputes.
- NRIs must consider hiring a trusted lawyer to help ensure compliance with relevant laws and a smooth transition of transfer of title.
Introduction:
Inheriting property in India is a crucial part of estate planning. However, the process can be complicated and involves legal complications or challenges. Property inheritance becomes a bone of contention amongst blood relations if it is not well-planned.
Non-Resident Indians (NRIs), particularly, may face unique legal implications and considerations while dealing with the inheritance of their property. Further, the Indian laws governing inheritance and succession of property may have a differential impact on NRIs compared to their Indian counterparts.
Inheritance: Meaning
Inheritance refers to the devolution of the property, its respective title, rights, deeds, and debts to a descendant upon the owner’s death.
Two Ways of Inheritance
These are the following two ways of property inheritance/ succession:
1. Testamentary Succession: This type of succession takes place according to the wishes stated in the Will left behind by the testator in favour of the legatee.
2. Intestate Succession: This type of succession occurs when the deceased dies without making a Will. It is governed by personal laws of the deceased, such as the Hindu Succession Act, 1956 and Muslim law, in the absence of any Will.
It is important to note that inheritance and succession can apply to moveable and immovable properties.
Types of Property Available for Inheritance to NRIs
· An NRI or a person of Indian origin may inherit any residential or commercial immovable property in India.
· Additionally, individuals could inherit agricultural land or a farmhouse that they could not purchase under RBI and FEMA regulations.
Laws Governing Inheritance of Property in India
· In India, property inheritance is primarily regulated by the Hindu Succession Act of 1956, the Indian Succession Act of 1925, and the personal inheritance laws of Muslims.
- In the case of ancestral property: The laws governing the deceased person’s personal property will dictate which individuals are recognized as legal heirs and how the property will be divided among them. The laws also specify the share that each legal heir will receive.
- In the case of self-acquired property, the owner can also make a Will stating his wishes regarding how the property will be distributed after his death.
· The Foreign Exchange Management Act 1999 provisions and guidelines of RBI are also crucial in this respect.
· It is crucial to understand which law applies in the respective circumstances to ensure a smooth transition of property rights; thus, learning and understanding of concerned laws also form part of the legal implications of inheriting property in India.
Legal Implications
- Property Ownership and Succession Rights: Non-Resident Indians (NRIs) could face complicated property ownership and succession rights issues if they are unaware of the legal implications of inheriting property.
- Taxation and Compliance: There is so no particular tax liability on inheriting property in India.
However, Capital Gains tax is levied on the sale of property, whether inherited or self-acquired.
· The capital gains tax rate will be determined by how long the property has been held. Depending upon the holding period after inheriting the property, the NRI will be liable to either pay a short-term capital gains tax (held for less than 36 months) or a long-term capital gain.
It becomes imperative for the NRIs to be fully aware of the legal implications of taxes on the sale of property and their compliance requirements in both India and their country of residence. It entails that NRIs be aware of the tax treaties in their respective countries and India to prevent double taxation.
3. Legal Representation: NRIs must consider hiring trusted lawyers to help ensure compliance with relevant laws. Such able lawyers help assist with property valuation and facilitating property transfer. Legal professionals that are well-versed in property laws are capable enough of providing valuable guidance through their pool of resources.
4. Documentation and Registration: NRIS must consider the documentation and registration requirements for a smooth property transfer. Once you inherit the property, you must register the ownership title with the concerned registering Authority and get the ownership title in your name. This is a crucial step to safeguard your interests and avoid future disputes.
5. Dispute Resolution: If any dispute arises within the family regarding the share inherited, every NRI should explore alternative dispute resolution options to expedite the resolution process and minimize legal complexities while assuring a cost-effective solution.
Conclusion:
Inheriting property in India is a complex procedure that entails a duty on the part of every NRI to be vigilant when dealing with matters of inheritance. They must take note of the necessary legal implications that may arise, failing which they become prone and vulnerable to unnecessary legal disputes which may result in financial losses. However, by being aware of the legal implications and taking the necessary steps, NRIs can ensure that the transfer process is smooth and efficient.
As a non-resident Indian (NRI) inheriting property in India. In that case, it is important to seek legal advice from a lawyer specializing in Indian property law to help you understand the legal implications of inheriting property in India.
