Succession Planning for NRIs: Navigating Indian Inheritance Laws and Taxation 2025

For Non-Resident Indians (NRIs), managing assets back home in India extends beyond mere investments; it often involves thoughtful succession planning to ensure a smooth transfer of wealth to future generations. The intricate web of Indian inheritance laws, coupled with potential tax implications and cross-border considerations, makes this a critical area requiring expert guidance.
As a trusted tax advisor and leading CA in Mumbai, CA Sweta Makwana & Associates specializes in comprehensive estate planning for NRIs, helping them understand the nuances of Indian inheritance laws, draft effective wills, and navigate the associated legal and financial procedures in 2025.

Why is Succession Planning Essential for NRIs?

Effective succession planning prevents future disputes, ensures your assets are distributed according to your wishes, and minimizes legal and financial burdens on your heirs. For NRIs, whose assets may span multiple jurisdictions, this planning is even more vital to avoid complexities arising from conflicting laws and ensure seamless wealth transfer.

Indian Inheritance Laws: A Complex Landscape

Unlike many Western countries, India does not have a single, uniform inheritance law. Succession is primarily governed by personal laws, which are determined by the religion of the deceased.

Key Personal Laws Governing Succession:

Hindu Succession Act, 1956 (as amended in 2005): Applies to Hindus, Jains, Sikhs, and Buddhists. This Act governs both ancestral and self-acquired property. Key points include:
- Equal inheritance rights for daughters and sons in ancestral property.
- Rules for testamentary succession (through a Will) and intestate succession (without a Will).
Muslim Personal Law (Shariat) Application Act, 1937: Governs Muslims. It is largely based on Islamic principles, distinguishing between Sunni and Shia laws. Key aspects:
- A Muslim can typically bequeath only up to one-third of their property through a Will; the remaining two-thirds follow intestate succession rules.
- Specific shares are defined for heirs (sharers and residuaries).
Indian Succession Act, 1925: Applies to Christians, Parsis, and those who marry under the Special Marriage Act, 1954. This Act provides comprehensive rules for both testamentary and intestate succession.

Important Note: If an individual from any religious community marries under the Special Marriage Act, 1954, their succession will be governed by the Indian Succession Act, 1925, irrespective of their religion. This is a crucial detail for inter-faith marriages.

Differentiating Movable and Immovable Property:

Immovable Property (land, house, etc.): Governed by the laws of the country where the property is located (lex situs). Thus, Indian law applies to all immovable property in India, regardless of the NRI’s country of residence.
Movable Property (bank accounts, shares, jewelry, etc.): Generally governed by the laws of the country where the deceased was domiciled at the time of their death. However, for practical purposes in India, financial institutions often require compliance with Indian procedures for movable assets located in India.

The Power of a Will: Ensuring Your Wishes are Honored

A Will (or Testament) is a legal declaration of your intentions regarding the distribution of your property after your death. For NRIs with assets in India, drafting a clear and legally valid Indian Will is paramount.

Key Considerations for an NRI Will (2025):

Separate Will for Indian Assets: It is often advisable for NRIs to have a separate Will specifically for their Indian assets, distinct from any Will they may have for assets in their country of residence. This avoids conflicts of laws and simplifies the probate process in both jurisdictions.
Identification of Assets: Clearly list all Indian assets, including immovable properties, bank accounts (NRE/NRO), mutual funds, shares, and other investments.
Executor Appointment: Appoint a reliable executor based in India. This individual will be responsible for obtaining probate (if required) and distributing assets as per your Will. Choosing someone familiar with Indian legal procedures can significantly streamline the process.
Witnessing: An Indian Will must be signed by the testator (the person making the Will) and attested by at least two witnesses in the testator’s presence. The witnesses should not be beneficiaries of the Will.
Registration: While not mandatory, registering your Will with the Sub-Registrar’s office can add authenticity and prevent challenges to its validity in the future.
Execution Abroad: If the Will is executed outside India, it should be notarized in the country of residence and attested by the Indian Embassy or Consulate. This ensures its acceptance in Indian courts.

Understanding Probate and Succession Certificate

Probate: This is a legal process where a court certifies the authenticity and validity of a Will. Probate is generally mandatory in certain states, notably Maharashtra, West Bengal, and Madras, if the Will was made within the respective state’s territorial limits and concerns property located within those limits. For NRIs with properties in Mumbai or other parts of Maharashtra, obtaining probate is often a critical step.
Succession Certificate: In the absence of a Will (intestate succession), or for movable assets like bank deposits, shares, and provident fund dues, a Succession Certificate may be required. This certificate, issued by a Civil Court, establishes the legal heirs’ entitlement to claim the deceased’s movable assets. This is especially important for NRIs trying to access Indian bank accounts of their deceased relatives.
Legal Heir Certificate: While not a conclusive proof of succession for all assets, a Legal Heir Certificate (issued by local municipal authorities) identifies the legal heirs of a deceased person for various administrative purposes.

Action Point: Navigating the specific requirements for probate or a succession certificate can be complex. Engage a professional like CA Sweta Makwana & Associates for expert guidance on these legal formalities.

Taxation of Inherited Property and Assets in India (2025)

One of the most significant advantages for inheritors in India is the absence of a specific Inheritance Tax (or Estate Duty). India abolished estate duty in 1985.

No Tax on Inheritance: As of 2025, when an NRI inherits property or assets in India, there is no immediate tax liability on the mere act of inheriting. This applies to both movable and immovable assets.
Tax on Income from Inherited Assets: While the inheritance itself is not taxed, any income generated from the inherited assets after they are transferred to the NRI’s name will be taxable in India.
- Rental Income: If an inherited property generates rental income, the NRI will be liable to pay income tax on this rental income as per Indian tax laws (refer to our previous blog on “Taxation of Rental Income for NRIs in India: Key Updates for 2025”).
- Interest/Dividend Income: Interest from inherited bank accounts or dividends from inherited shares will be taxable.
Tax on Sale of Inherited Property (Capital Gains Tax): If the NRI subsequently sells the inherited property in India, capital gains tax will be applicable.
- Holding Period: The holding period for calculating capital gains is considered from the date the original owner acquired the property.
- Cost of Acquisition: The cost of acquisition for the inheritor is generally considered the cost at which the original owner acquired it.
- Indexation Benefit: For long-term capital gains (property held for more than 24 months), NRIs can claim indexation benefits to adjust the purchase price for inflation, thereby reducing the taxable gain.
- TDS on Sale: The buyer of the property from an NRI is required to deduct TDS at 20% (plus surcharge and cess) for Long-Term Capital Gains (LTCG) and at slab rates (effectively 30% or more) for Short-Term Capital Gains (STCG). NRIs can apply for a Lower or Nil TDS Certificate under Section 197 if their actual tax liability is lower.
- Exemptions: NRIs can claim exemptions under Sections 54, 54F, or 54EC if they reinvest the capital gains in specified assets or another residential property in India, similar to residents.

Repatriation of Inherited Funds: FEMA Guidelines

The Foreign Exchange Management Act (FEMA) regulates the repatriation of funds from India.

Repatriation Limit: An NRI can generally repatriate up to USD 1 million per financial year (from their NRO account) from inherited assets, including sale proceeds of inherited property, subject to applicable taxes being paid.
Documentation: Repatriation requires submitting specific documents to your bank, including the Will (if any), succession certificate, legal heir certificate, and Forms 15CA and 15CB (a certificate from a Chartered Accountant confirming tax compliance for remittances exceeding ₹5 lakh).
RBI Approval: While general inheritance of property by an NRI does not require prior RBI approval, if a foreign citizen (not an NRI) inherits property in India from another NRI, prior RBI approval might be required.

Repudiation of Inheritance

It is possible for a legal heir or beneficiary to repudiate or renounce their inheritance. This involves formally declining the inheritance, often done through a deed of relinquishment or affidavit. The legal implications and process for repudiation vary based on the specific personal law and the nature of the asset. This could be relevant for NRIs who prefer not to take ownership of certain Indian assets due to management complexities or tax implications in their country of residence.

Final Words

Succession planning for NRIs is a multifaceted process that integrates legal, financial, and tax considerations. A well-crafted plan ensures your Indian assets are transferred seamlessly, preserving your legacy for generations. Given the complexities of Indian personal laws, cross-border regulations, and evolving tax provisions for 2025, professional advice is indispensable.

For expert assistance with drafting your Indian Will, navigating probate or succession certificate processes, understanding tax implications of inherited assets, and ensuring FEMA compliance for repatriation, get in touch with CA Sweta Makwana & Associates. As a leading compliance specialist for SMEs, startups & NRIs in Mumbai, we provide tailored solutions to secure your financial future.

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For official information on the Foreign Exchange Management Act (FEMA) regulations concerning NRIs, you can refer to the Reserve Bank of India (RBI) website.