Inheriting immovable property by NRIs

Any person, no matter where he resides, can inherit a property permanently in India. You can be a Non-Resident Indian (NRI) or even a citizen of another country and yet possess a property you have inherited. However, in order to permanently hold or receive a property in India, NRIs are required to follow some procedures.

1. The rules

An NRI can inherit an immovable property in India from a person who is residing in India.  

If the NRI is inheriting a permanent property from a person who lives outside India, the transfer has to fall under all the agreements or rules of foreign exchange laws.

If the person inheriting the property is a Person of Indian Origin (PIO), the foreign exchange laws will be enforced even if the previous owner is an Indian resident. A PIO can sell or gift a farmhouse or an agricultural territory, received by inheritance, to any Indian citizen. 

2. Holding an immovable property

If an NRI wants to hold a permanent property in India, inherited from a person living outside India, the process has to be approved by the Reserve Bank of India and it should follow all the rules of foreign exchange law.

3. Tax implications

If an NRI receives an immovable property in India by inheritance, the property will not be treated as ‘Capital Gain’ and will not be eligible for tax. However, if the inherited property is used in the following ways, taxes would be applicable:

  • If the NRI uses the property for generating income.
  • If the property is given on rent or is used as an investment asset.
  • If the NRI wishes to sell the property.

The capital gain will be the amount of money the earlier owner spent for the property and its upgradation.  

4. Registration papers and stamp duty

If an NRI receives an immovable property by inheritance then stamp duty will be applicable. The person inheriting the property should possess the legal registration papers as proof of the procedure. These papers are very important for the inheritor in question.

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