Inheritance

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

Ans.

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

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

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

Ans.

When a person passes away without a Will (i.e. Intestate), the estate / assets / wealth devolve in the following manner:

1. In case of Hindu, Jain, Sikh, Buddhist- The estate / assets / wealth shall devolve in the manner specified under the Hindu Succession Act.

2. In case of Christian, Parsi, Jew- The estate / assets / wealth shall devolve in the manner specified under the Indian Succession Act.

3. In case of Muslims- The estate / assets / wealth shall devolve in the manner specified under Muslim Law.

In what manner does the estate / assets / wealth devolve on the death of a person when a person passes away after making a Will (i.e. Testate)?

Ans.

When a person passes away after making a Will (i.e. Testate), the estate / assets / wealth devolve in the following manner:

1. All except Muslims - The estate / assets / wealth shall devolve in the manner specified under the Indian Succession Act.

2. In case of Muslims - The estate / assets / wealth shall devolve in the manner specified under Muslim Law.

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 NRI shall also have to keep in mind the tax implications and reporting requirements of inheritance in his / her country of Residence.

Whether a NRI can acquire property by way of Inheritance?

Ans. Any person, whether or not resident / citizen of India is eligible to receive property by way of Inheritance. However, Transfer / Holding of the said property shall be subject to exchange control regulations in India.

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

Ans. Yes, a NRI is eligible to repatriate sale proceeds of an immovable property inherited from a person resident in India subject to the certain conditions and payment of taxes upto 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:

a. 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).

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

How will the asset / property be inherited, if a person passes away without a Will?

Ans.

When a person passes away without a Will, the provisions of the Succession law (as specified in the above Flowchart) shall have to be followed to distribute the deceased person's property among the legal heirs. The rules of succession determine who the heirs of a deceased are and what would their share be in the Inheritance.

Further, a NRI may have to obtain a Succession Certificate to substantiate that he / she is a legal heir as per the provisions of the Succession Law.

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 as per the terms of the WILL.

Probate is mandatory in case of:

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

Key Points to be kept in mind:

Currently there is no Inheritance / Estate tax applicable in India. Several countries however, levy Inheritance / Estate tax. In this regard, a NRI shall also have to keep in mind the tax implications and reporting requirements of inheritance in his / her country of Residence.

Further, for your information kindly find below the 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%