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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
1. What is inheritance planning for NRIs?
Inheritance planning helps organise how your assets and investments will be passed on to your family in the future. We help ensure your wealth is transferred smoothly and according to your wishes.
