When a non-resident Indian (NRI) inherits financial assets like shares, mutual funds, or bonds from a deceased relative in India, the process involves specific legal and regulatory steps that differ from those applicable to resident Indians. Understanding these procedures is essential to ensure smooth transfer of assets and compliance with Indian laws.
Understanding the Legal Framework
Indian law allows NRIs to inherit movable and immovable property from resident relatives. The Foreign Exchange Management Act (FEMA) governs how NRIs can hold and manage such inherited assets. Unlike fresh investments, which face certain restrictions, inherited securities generally receive more favorable treatment under FEMA regulations.
The first step involves establishing legal heirship through a succession certificate, will probate, or legal heir certificate issued by appropriate authorities. This documentation proves your right to claim the deceased's assets and is mandatory for financial institutions to process the transfer.
Documentation Requirements
To claim inherited financial assets, NRIs typically need to submit several documents to the respective asset management companies, depositories, or registrars. These include a death certificate of the deceased, proof of relationship (birth certificate, family register, or affidavit), and identity proof of the claimant including passport, PAN card, and overseas address proof.
Additionally, you will need to provide a succession certificate or probated will. In cases where the asset value is relatively small, some institutions may accept a notarized indemnity bond along with no-objection certificates from other legal heirs, though this varies by institution.
Demat Account Considerations
For shares held in demat form, the securities need to be transferred to the NRI's demat account. If you don't already have an NRI demat account, you'll need to open one with a depository participant in India. NRI demat accounts come in two types: repatriable and non-repatriable, depending on whether you intend to transfer the funds abroad eventually.
The depository participant will require all inheritance documents along with a transmission request form. The processing time varies but typically takes four to eight weeks once all documents are submitted correctly.
Mutual Fund Inheritance Process
For mutual funds, the process involves approaching the respective asset management company (AMC) or registrar with the required documents. Each AMC has its own transmission form that needs to be filled out accurately.
The units can be transferred to the NRI's existing folio or a new folio can be created. You'll need to update your KYC details and ensure your bank account details are linked properly. Many AMCs now allow electronic submission of documents, which can expedite the process for NRIs living abroad.
Tax Implications and Repatriation
Inherited assets do not attract inheritance tax in India, as such taxes were abolished in 1985. However, any income generated from these assets—such as dividends, interest, or capital gains upon sale—will be taxable in India according to applicable rates for NRIs.
If you wish to repatriate the proceeds from selling inherited securities, you can do so subject to certain conditions. The repatriation of sale proceeds from inherited shares and securities is generally permitted up to USD 1 million per financial year under the Liberalized Remittance Scheme (LRS), provided you have held the assets in a repatriable account.
Practical Steps to Follow
Begin by collecting all relevant documents well in advance, as obtaining certificates from Indian authorities while living abroad can be time-consuming. Consider appointing a power of attorney to a trusted relative or professional in India to handle documentation and liaison with financial institutions.
Maintain detailed records of all communications and transactions. Keep certified copies of all documents submitted, as multiple entities may require the same paperwork.
Engage with a chartered accountant or tax advisor familiar with NRI taxation to understand your tax liabilities and plan accordingly. Similarly, consulting with a financial advisor can help you decide whether to hold, sell, or reinvest the inherited assets based on your financial goals and circumstances.
Disclaimer
This article provides general information about claiming inherited financial assets in India and should not be construed as legal, tax, or financial advice. Rules and regulations may vary based on individual circumstances and are subject to change. Readers are advised to consult qualified professionals including lawyers, chartered accountants, and financial advisors for guidance specific to their situation.
