Inheritance

What is Inheritance? Which statutes govern devolution of estate/ assets/ wealth on death of a person?

Ans.

Any assets/ wealth devolving to the beneficiaries by virtue of succession on death of a person is Inheritance.

Following are the 3 Legal Statutes in India that deal with devolution of estate/ assets/ wealth on the death of a person:
Hindu Succession Act
Indian Succession Act
Muslim Law

In what manner does estate/ assets/ wealth devolve on the death of a person when a person passes away with/ without a WILL (i.e. Intestate)?

Ans.

In case of

Manner of Devolution

When a person passes away without a Will

Hindu, Jain, Sikh, Buddhist

Manner specified under the Hindu Succession Act

Christian, Parsi, Jew

Manner specified under the Indian Succession Act

Muslims

Manner specified under Muslim Law

NOTE: A Non-Resident may have to obtain a Succession Certificate to substantiate that he/ she is a legal heir as per the prevailing laws.

When a person passes away after making a Will

Any Person

As per terms of the WILL (subject to all governing conditions of a Legal WILL being satisfied)

Is any asset / property acquired by way of Inheritance subject to Tax in India?

Ans.

No, currently there is no Inheritance / Estate tax applicable in India. However, a Non-Resident shall also have to keep in mind the tax implications and reporting requirements of inheritance in his / her country of Residence.

Kindly find below rates that may be applicable in the US and UK:

Resident / Citizen

Remarks (subject to exemptions, reporting, etc. as per the domestic law of the country)

US

Estate duty upto approx. 40%

UK

Estate duty upto approx. 40%

Whether a Non-Resident can acquire property by way of Inheritance?

Ans. Any person, whether resident / citizen or not of India is eligible to receive property by way of Inheritance. However, transfer / holding of the said property shall be subject to FEMA regulations.

If an immovable property is received by way of Inheritance by a Non-Resident, can he / she repatriate the sale proceeds?

Ans. Yes, a Non-Resident is eligible to repatriate sale proceeds of an immovable property inherited, subject to the certain conditions and payment of taxes up to the monetary limits specified by RBI.

In case any Income is earned from a property acquired by way of Inheritance, is it subject to Tax in India?

Ans.

Yes, income earned from property acquired by way of Inheritance is taxed in India as under:

i. Upto the date of death - taxed in the hands of the deceased. However, the same would be leviable and recoverable from the legal representatives of the deceased in a like manner and to the same extent as the deceased (liability restricted upto the value of property inherited).

ii. After the date of death - taxed in the hands of beneficiaries / executor(s) in their individual capacity.

What is a Probate? Is obtaining a Probate mandatory, in case an asset/ property is acquired by way of Inheritance through a WILL?

Ans. Probate is an official evidence of the executor’s right to dispose off the property of the Testator (person who makes the WILL) as per the terms of the WILL.

Probate is mandatory in case of:

i. WILLs by Hindus executed within areas under the jurisdiction of Bombay, Madras and Calcutta High Courts;
ii. WILLs by Hindus outside these areas if they relate to immovable property situated within the jurisdiction of Bombay, Madras and Calcutta High Courts.