Rights Of NRIs Over Ancestral Property

NRIs can inherit ancestral properties in India. However, it is important for them to have proper knowledge regarding establishing and maintaining their rights over ancestral properties in order to avoid mismanagement or disputes related to inherited property. There are few things for NRIs to keep in mind while dealing with ancestral properties.

Laws Governing Inheritance Of Ancestral Properties By NRIs:

NRIs can inherit any type of property including residential, commercial, agricultural, plantation and/or farmland. There is no slab on inheritance as long as it is inherited under the aegis of Foreign Exchange Management Act (FEMA) Regulations as well as the Income Tax Act. These laws are applicable to the inheritance of immovable property and its continued ownership by NRIs.

There is no estate duty or wealth tax imposed on the inheritor of the property. Although, if an NRI has earned some income from the property, then he must pay income tax on it. But in case, it has been kept vacant for the purpose of an occasional visit to India, then there is no requirement to pay income tax (if it is the only property that the NRI owns). If an NRI owns more than one property, then one can be declared as vacant and others can be termed as earning notional rental income, which is based on the rent on the same kind of property in the market.

DISCLAIMER- For the purpose of taxation on property, definitions mentioned by the Income Tax Act of 1961 will be applicable. Hence, who qualifies as an NRI or who qualifies as Ordinary Residents will be determined by the Income Tax Act 1961.

An NRI can also rent or sell the property. While there is no bar on selling commercial property; the agricultural land, plantation property, and farmhouse can only be sold to residents of India.

DISCLAIMER- NRIs can sell their inherited properties to resident Indians, other NRIs or other PIOs only.

There is no bar on the repatriation of sale proceeds of inherited property. Although, if sale proceeds are from the property which was inherited from a resident of India, some conditions need to be fulfilled such as: -

    • The amount should not exceed USD 1 million each financial year.
    • The beneficiary must produce documentary evidence of inheritance, which must be certified by a Chartered Accountant.
    • The beneficiary also needs to produce a tax clearance from The Income Tax authority regarding the deed of settlement.

DISCLAIMER- There are some “specific” and “general” permissions required from Reserve Bank of India for repatriation which depends upon the status of the person from whom the property is inherited. It is advised to consult a lawyer in this regard.

he process of managing an ancestral property can be quite challenging, especially transferring the property. There are a lot of legal processes and aspects that need to be met. It is advisable to consult a property lawyer to help you in the process. Our team of lawyers helps in property matters including:

Transfer of property inherited through will or law of succession
Partition of property inherited through will or law of succession
Selling inherited property
Illegal and unauthorized transfer of inherited property
Illegal possession of the inherited property