Can NRI Sell Inherited Property in India?

August 1, 2024 by Rustomjee Editor

The question, Can NRI sell inherited property in India?, epitomises the complex web of legal, regulatory, and logistics challenges that Non-Resident Indians face when handling inherited property in their homeland.

It ranges from transferring proceedings, tax-related issues, and compliance by the RBI associated with the repatriation of funds NRIs have to follow cautiously. This article reflects on the considerations and processes involved in handling and transfer of inherited property in India.

Eligibility to Sell Property

The eligibility criteria for NRIs (Non-Resident Indians) to sell inherited property in India are discussed below:

• Selling to Indian Residents

NRIs are eligible to sell property in India to Indian residents without any specific restrictions. This process normally follows the same procedure and regulations as those defined by the local authorities.

• Selling to Other NRIs or Foreign Nationals

When an NRI intends to sell property to another NRI or to a foreign national, the transaction needs to be done in compliance with the regulations prescribed by the Reserve Bank of India. These include obtaining necessary permissions and following specific guidelines to make such a sale legally and smoothly.

So, can NRI sell inherited property in India? Now that the answer is clear, we can explore the legal procedures for NRIs to sell inherited property in India.

Legal Procedures for Selling Inherited Property

Here are the processes involved in the transfer of inherited property in India:

• Transfer of Property Title and Documentation

The inherited property will be sold in India by transferring the title from the deceased to the heir. This includes obtaining a legal heir certificate and making sure all documents concerning the property are clear and updated.

• Obtaining a Legal Heir Certificate

A legal heir certificate is indispensable to prove who the rightful heirs of the deceased owner are. It is usually obtained from the local revenue authorities or a court, as determined by state laws.

• Need for a Clear Property Title

Ensure the property has a clear title to avoid legal complications during the selling process. This involves verifying ownership records, reviewing the history of past transactions, and checking for any encumbrances on the property.

Tax Implications

• Capital Gains Tax: Short-term vs. Long term

Capital gains tax is levied on the profit accrued from the transfer of inherited property in India. The tax rate differs for short-term (less than 2 years) and long-term (more than 2 years) holdings.

• Calculation of Capital Gains & Indexation Benefits

Capital gains will be computed using the sale price less the indexed cost of acquisition and improvement. Indexation benefits lower the taxable capital gains by raising the purchase price for inflation.

• Sections 54 and 54EC for Tax Exemptions

Under Sections 54 and 54EC, capital gains tax is exempt if such proceeds are reinvested in another property or specified bonds within a stipulated time.

Read More: TDS on Sale of Property by NRI in 2024

Repatriation of Sale Proceeds

• RBI Guidelines on Repatriation Limits

NRIs are permitted to repatriate funds up to USD 1 million in any financial year from the transfer of inherited property in India, subject to certain conditions and documentation.

• Documentation for Repatriation

For the repatriation of funds abroad, documents like a sale deed, a certificate from a chartered accountant, and RBI approval, in case of applicability, are required.

So, after a clear answer to the question, can NRI sell inherited property in India? Let’s now look at tips for managing property from abroad.

Managing Property from Abroad

Here are the tips for managing property from abroad for foreign citizens selling property in India:

• Hiring Property Management Services

While living abroad, a good property management service can make all the difference in collecting dues, handling disputes, and tackling emergencies. Services like Crest Property Management can extend end-to-end solutions to give NRIs peace of mind and efficiently manage their assets in India.

• Using Technology for Remote Property Management

Technology is expected to play a very vital role in remote property management. NRIs can leverage property management software and apps that track payments and refunds. Therefore, there comes openness and real-time control, no matter the distance from the site.

• Using Different Methods of Communication

The lines of communication need to be open. NRIs should remain in touch with real estate agents and legal advisors through regular emails, calls, online meetings, or video conferencing. Such communication keeps one updated on post-sale matters concerning the property and ensures timely decision-making.

Practical Tips for a Smooth Transaction

Here are some effective tips for seamless transactions for foreign citizens selling property in India:

• Get the Important Documents

Before entering into any transaction involving property, NRIs must keep all the relevant documents handy, like property deeds, title certificates, tax records, proofs of identity, etc. This can help speed up legal and financial formalities to a great extent.

• Seek Professional Advice for Legal and Tax Matters

Legal and tax complications require professional advice. NRIs need to contact professionals who possess adequate knowledge of Indian laws and tax legislation to ensure compliance and financial optimisation when purchasing property.

• Understand the Current Market Situation

NRIs must be aware of the local trends and values of property. They should get constant updates from market studies, discussions with real estate agents, and analysis of economic trends that may affect property prices.

• Plan Repatriation of Funds in Advance

When repatriating funds from India following the property sale, it is essential to adhere to the Reserve Bank of India’s guidelines. This would include understanding applicable taxes, obtaining necessary certificates, and using designated bank accounts, NRO or NRE, for easy and smooth repatriation.

Read More: Form 27Q TDS Return for NRI Payments in 2024

Takeaway

So, can NRI sell inherited property in India? The answer is yes.

However, the transfer of inherited property in India as an NRI has legal, taxation, and practical challenges. As complicated as the task may seem, the laws are understandable, and the right advice will make it manageable.

Equipped with knowledge and preparedness, NRIs can ensure that their inheritance matters for residential property are dealt with efficiently and in compliance with laws.

FAQs About Property Inheritance for NRIs

1. Can NRIs inherit agricultural land in India?

Yes, NRIs may inherit agricultural land in India, subject to certain conditions and restrictions imposed by state laws, which vary between states.

2. Are there any taxes for inheriting property in India on NRIs?

NRIs can inherit property in India, but it may go to the collection of income tax and, under some conditions, capital gains tax if the property is sold. The taxation may be according to several factors, including the nature of inherited property and its usage.

3. Which documents are needed to prove NRIs’ inheritance of property in India?

The death certificate of the deceased owner, the will, succession certificate or legal heir certificate, mutation certificate, and other property-related documents proving ownership and title are essential documents needed to prove NRIs’ inheritance of property in India.

4. Can NRI sell inherited property in India without coming to India?

Yes, an NRI can sell inherited property in India without coming to the country. They will simply have to give power of attorney to someone whom they trust here in India or get all the paperwork done from abroad, though procedures may differ from state to state and may even require legal aid.

5. How can NRIs handle property tax from India and handle rental income?

NRIs can handle property taxes in India by appointing a trusted representative or power of attorney holder who can handle tax filings. Rental income from such assets can be managed through a stipulated NRO or NRE account, and taxation on rental income can be filed as per the provisions of Indian tax laws with the help of a tax consultant or advisor.

6. Can NRIs inherit movable and immovable assets in India?

Yes, NRIs can inherit both movable and immovable properties by following the associated legal procedures.