What Every NRI Family Needs to Know About Cross-Border Inheritance in India

For the roughly 32 million Indians living abroad, the question of inheritance is one of the most financially consequential - and least understood - topics in personal finance. When a parent passes away in India leaving behind property, fixed deposits, or shares, the NRI heir finds themselves navigating two legal systems, two tax regimes, and a foreign exchange framework that comes with strict rules on how much money can leave the country.

Getting it right requires more than just a will. It requires understanding how Indian succession law works, what FEMA allows, and what your country of residence expects you to declare.

How Indian Succession Law Applies to NRIs

India does not have a single unified inheritance law. What applies depends on the religion of the deceased. Hindu, Sikh, Buddhist, and Jain families are governed by the Hindu Succession Act, 1956. Muslims follow personal law under the Muslim Personal Law (Shariat) Application Act. Christians and Parsis fall under the Indian Succession Act, 1925. For NRIs, this matters because the law of the deceased's domicile - usually India - governs how immovable property (land and buildings) is distributed, regardless of where the heir lives.

If there is a valid will, the executor can apply for probate in an Indian court. If there is no will - which is far more common than it should be - the estate is distributed as per the applicable personal law, which can mean a lengthy legal process, especially if multiple heirs are involved.

FEMA Rules: What NRIs Can Inherit and Repatriate

Under the Foreign Exchange Management Act (FEMA), NRIs can freely inherit immovable property in India, including agricultural land, plantation property, and farmhouses - even though they cannot purchase these categories directly. This is one of the important distinctions the law makes between buying and inheriting.

Repatriation of the sale proceeds, however, comes with a ceiling. An NRI can remit up to USD 1 million per financial year from the sale of inherited property, provided the funds are held in a Non-Resident Ordinary (NRO) account. Any amount above this limit requires specific RBI approval. Financial assets - bank balances, mutual funds, shares - can generally be repatriated after paying applicable taxes, subject to the same annual limit.

Tax on Inherited Assets - India Side

India abolished its inheritance tax (estate duty) back in 1985, so there is no tax simply on receiving an inheritance. However, when the NRI eventually sells the inherited asset, capital gains tax kicks in. For property sold after being held for more than two years, long-term capital gains tax applies at 12.5% (plus applicable surcharge and cess). The buyer is required to deduct TDS at source - which can be as high as 20% - before paying the NRI. The NRI can claim a refund of excess TDS while filing their Indian tax return, but this requires filing an ITR in India.

⚠ Important: India does not tax the receipt of inheritance, but your country of residence might. The US, UK, Canada, and Australia all have their own estate or inheritance tax rules. An NRI inheriting Indian assets must declare them to their resident country's tax authority - failure to do so can attract severe penalties.

The Will vs. No-Will Problem

A surprisingly large proportion of Indians - including wealthy ones - die intestate (without a will). For NRI heirs, this dramatically complicates matters. Without a will, movable assets require a Succession Certificate from a civil court, while immovable property requires a Legal Heir Certificate or probate, depending on the state. Both processes take time - often a year or more - and require the physical presence or a notarised power of attorney from the NRI heir.

The single most impactful thing an NRI family can do today is ensure the Indian parent has a registered will with a named executor - it can cut years off the inheritance process.

The Bottom Line

Cross-border inheritance is not just an emotional event - it is a legal and financial process with hard deadlines, strict limits, and real tax consequences on both sides of the border. NRI families who plan ahead - with registered wills, updated nominations, and a basic understanding of FEMA rules - can avoid the years of paperwork and court visits that catch so many others off guard. The time to act is now, not when a family is already in grief.