Succession planning for NRIs: Your guide to solve challenges

Over the last several years, millions of Indians have moved abroad for education, work or family and have continued living in their adopted countries. They visit India periodically but mostly have no intent of returning permanently. However, back home as their parents and loved ones pass on, these Non-Resident Indians inherit significant property and other assets through succession.

Given the limited exposure to changing laws, local circumstances and availability of time, they tend to struggle navigating the road to succession. Much of this struggle is with complex inheritance laws and opaque procedures compounded with opportunistic pricing by intermediaries. Consequently, most NRIs fall back on word-of-mouth references that usually confer further opacity and higher opportunistic pricing, thus preventing them from inheriting what is lawfully theirs.

According to Soubir Bose, co-founder and CTO, EasyInherit, there is no consolidated information registry that caters to this particular social situation – from applicable laws, guidelines, points of contact and practitioners. 

"The challenges are intertwined with municipal procedures at local levels, community-based succession laws and national codes of taxation. These differ in interpretation and applicability based on asset classes – immovable to financial – and even location," he said.

Tax On Inherited Property 

Real Estate is the single largest concern area for NRIs and the most complex to deal with. NRIs can inherit property in India and would need the services of specialised succession advisories to file their claims. Therefore, it is suggested to always rely on specialised advisories to handle cases.

While there is no income tax payable on inheritance, however, the property may be subject to wealth tax based on certain conditions. Local municipal taxes are due on the property irrespective of ownership and use and must be cleared.

Selling Inherited Property 

In case the NRIs intend to sell off inherited property since they do not intend to stay in the country, the proceeds are subject to tax and computation of the net gains requires complex calculation. There are also limits on the amount that can be repatriated in a financial year.

Inherited Financial Assets 

Besides, there are a host of financial assets including bank accounts, insurance claims, ownership of shares and mutual funds, provident funds and postal savings among others being the next dominant asset classes that are inherited.

Each of these has slightly different procedures to claim and requires separate documentation. Depending on whether testamentary succession or nomination instructions are available, NRIs may have to prove the legitimacy of claims.

Bose said that the sale of financial assets attracts capital gains taxes and failure to file such can affect the legal status and attract criminal procedures that can have a deep impact.