“Synopsis”
If you’re an NRI with property, investments, or family in India, estate and succession planning isn’t optional it’s essential. While India doesn’t levy inheritance tax, there are still tax implications when assets are transferred or sold. This guide breaks down what’s taxable, what’s not, and how NRIs can structure their estate to minimize disputes and maximize efficiency.
1. Is Inheritance Taxable in India for NRIs?
No. India does not levy inheritance or estate tax. Whether you’re a resident or an NRI, inheriting property, shares, or money from a relative is not taxable at the time of inheritance.
Legal Reference:
- Inheritance tax was abolished in India in 1985
- Governed by succession laws like the Hindu Succession Act, Indian Succession Act, or Muslim Personal Law, depending on religion
However, tax may apply later when the inherited asset is sold or generates income.
2. What Becomes Taxable After Inheritance?
While receiving the asset isn’t taxable, the income or gains from it are. Here’s how:
a. Rental Income from Inherited Property
Taxable under “Income from House Property” TDS may apply under Section 195 if rent is paid to an NRI
b. Capital Gains on Sale of Inherited Assets
If you sell inherited property, shares, or gold, you’ll pay capital gains tax on the profit.
- Cost of acquisition = Fair Market Value (FMV) as of April 1, 2001 (if acquired before that)
- Indexation benefit available for long-term assets
- Tax rate:
- 20% with indexation for real estate
- 10% without indexation for listed shares (above ₹1 lakh gain)
Legal Reference:
- Section 49(1) – Cost of acquisition for inherited assets
- Section 54/54F/54EC – Exemptions on reinvestment of capital gains
3. Do NRIs Need a Will in India?
Yes. If you own assets in India, having a separate Indian will ensures:
- Faster asset transfer
- Fewer legal disputes
- Clarity for heirs and executors
Without a will, assets are distributed as per personal law (Hindu, Muslim, Christian, etc.), which may not align with your wishes.
4. What About Foreign Assets?
India does not tax foreign assets of NRIs. But:
- If your status changes to Resident or RNOR, global income may become taxable under Section 5 of the Income Tax Act
- Foreign assets may be taxed in your country of residence (e.g., US estate tax applies above $13.61 million in 2025)
Tip: Coordinate your Indian and foreign estate plans to avoid double taxation or legal conflicts.
5. Trusts and Foundations: Are They Tax Efficient?
Yes—setting up a private trust in India can help:
- Avoid probate (court approval of will)
- Protect assets from creditors or disputes
- Ensure smooth succession for minors or dependents
Trusts are taxed based on their structure (revocable or irrevocable) and income type. Consult a tax advisor to structure it right.
6. Common Mistakes NRIs Make in Estate Planning
- Not creating a will for Indian assets
- Assuming inheritance is always tax-free (it’s not, once sold)
- Ignoring capital gains tax on inherited property
- Not updating nominations in bank accounts or mutual funds
- Not coordinating Indian and foreign estate plans
Conclusion
In 2025, estate and succession planning for NRIs is about more than just writing a will—it’s about understanding what’s taxable, what’s not, and how to structure your legacy across borders. While India doesn’t tax inheritance itself, income and capital gains from inherited assets are very much taxable.
So if you’re an NRI with roots—and responsibilities—in India, don’t wait. Plan your estate, draft your will, and talk to a cross-border tax advisor. Because peace of mind isn’t just for you—it’s for the generations that follow.
