Taxation Impact on Inheritance of Assets in India (for NRIs)
Webinar by CA Ameet Patel & CA Mitsu Dalal
Gifts – Definition & Taxation Rules
Definition & Rules
- A Gift is a Sum of money, specified movable property (shares, jewellery, art, etc.), or immovable property received without (or for inadequate) consideration.
- No gift tax in India; but gifts > Rs.50,000 from non-relatives, the entire amount is taxable for the recipient under the head “Income from Other Sources”.
- Definition of "Relative" includes: spouse, siblings (and sibling-in-law), parents, lineal ascendants/descendants, members of HUF, etc.
- Gift received outside India by NRIs are not taxable in India.
Exempt Gifts
- Received from “relatives” (as defined in Sec 56(2)(x)).
- On occasion of marriage.
- Under a will or via inheritance.
- Received from any fund, foundation, university, other educational institution, medical institution or trust.
Taxable Value
Money
Entire amount if > Rs.50,000.
Movable Property
FMV (Fair Market Value) taxed if total FMV > Rs.50,000/-.
For inadequate consideration: Taxes on difference, if such difference > Rs.50,000.
Immovable Property
Stamp Duty Value (SDV) is taxed if property received without consideration and SDV is >Rs.50,000/-.
For Inadequate consideration: taxed on higher of Rs.50,000 or 10% of consideration.
Inheritance – Tax Treatment
No tax at the time of inheritance.
Tax applies only when inherited asset is sold.
Capital Gains Tax (LTCG/STCG) applies based on holding period.
Cost of acquisition: Taken as cost to the previous owner.
Date of acquisition: Original owner's date.
Capital Gains: Holding Period
| Asset Type | LTCG Holding Period |
|---|---|
| Listed Shares, Equity, MFs, UTI | > 12 months |
| Real Estate, Unlisted Shares, Gold | > 24 months |
- LTCG tax for NRIs: 12.5% (w/o indexation)
- STCG: Taxed at slab rate.
Repatriation Rules for NRIs
- NRO Account: Up to USD 1 million/year (Form 15CA/CB required). Year represents Financial Year.
- NRE Account: Freely repatriable (no limit).
Taxation of Annuity
- Life Insurance annuities received by nominee are taxable as "Income from Other Sources". (Exemption under Sec. 10(10D) not available for annuities.)
Common Documentation
- Gift Letter (with donor's PAN, relationship, date, mode).
- Bank Statements showing transfer of funds.
Common Issues
- No nomination or joint holder in assets.
- PAN required for executors.
- Valuation disputes on property.
- Tax returns for deceased and estate need filing.
DTAA Benefits
- Avoids double taxation for NRIs.
- Requires Tax Residency Certificate (TRC) and filing Form 10F in India.
ITR Filing for NRIs
Mandatory if:
- Income > Rs.2.5L (old regime) or Rs.3L (new). Rs.4L from FY 2025-26.
- Specific financial criteria triggering:
- Deposits > Rs.1 crore in current accounts
- Deposits ≥ Rs.50 lakhs in savings accounts
- Foreign travel expenses > Rs.2 lakhs (Self or for any other person)
- Electricity bills ≥ Rs.1 lakh
- Business turnover > Rs.60 lakhs
- Professional receipts > Rs.10 lakhs
- TDS/TCS total > Rs.25,000
Returns applicable for NRIs
ITR 2
Having income under the head Business or Profession.
ITR 3
Not having income under the head Business or Profession.
TDS
TDS applies on any payment made by a resident to an NRI (generally at 30% + cess).
On sale of immovable property by NRI: Buyer must deduct TDS @ 12.5% + surcharge + cess on total sale value (not just capital gains) or seek lower TDS Certificate.
Common FAQs
Gift from/to NRIs
Exempt if made between relatives.
