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NRIs: Inheriting Immovable Property and its implications



   Technically, any individual is entitled to receive, including by inheritance, property situated in India regardless of his residency or citizenship. However, the transfer of ownership and the holding of the property must adhere to the following regulations:

Foreign exchange regulations    

1. NRIs and PIOs are permitted to acquire any immovable property in India by way of inheritance from a person resident outside India who acquired such property in accordance with the provisions of the foreign exchange law in force at the time of the acquisition or from a person resident in India.


   2. PIOs may acquire any immovable property in India by way of inheritance from a person resident in India or a person resident outside India who acquired such property in accordance with the provisions of the foreign exchange law in force.


   3. The PIO may transfer agricultural land, plantation property or a farmhouse in India acquired by way of inheritance, by way of sale or gift to a person resident in India who is a citizen of India.


   4. A person resident outside India may hold any immovable property in India acquired by way of inheritance from a person resident outside India, with prior approval of the RBI, provided the bequestor had acquired such property in accordance with the provisions of foreign exchange law in force at the time of acquisition.

Tax implications    

1. There is no capital gain if the property is transferred through inheritance. However, any income generated out of these inheritances is added to taxable income, for example, rent, equity gains or interest on fixed deposits.


2. If the individual plans to sell the inherited property, he has to pay capital gains tax. For this, the cost of acquisition will be the cost at which the previous owner acquired the property including the cost of improvement.

Stamp duty and registration    

Stamp duty implication, as also described in the case of gifts, will arise if the property is transferred during the lifetime of the bequestor. The person who inherits property must ensure that the documents of title of property are in order. These documents are critical, especially if one intends to sell the property further.

 

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