Estate Planning for NRIs and Families in India
Estate planning is the process of deciding, in advance, how your assets will be managed during your life and passed on after it. Done well, it moves wealth to the next generation smoothly, keeps the family out of court, and protects assets from disputes and delay. Done badly, or not at all, it leaves your family to divide your estate under default succession law, often after months or years of probate. For NRIs, who typically hold assets in more than one country and answer to more than one legal system, careful estate planning matters even more.
N D Savla & Associates is a firm of Chartered Accountants in Mumbai that helps NRIs, high-net-worth individuals, and families with estate planning: Wills, private family trusts, succession, and the tax and FEMA side of passing on Indian assets.
Does India Tax Inheritance?
This is the first question most families ask, and the answer surprises many. India abolished estate duty in 1985 and has no inheritance tax or estate tax today. Receiving an asset by inheritance or under a Will is not taxed in the hands of the person who inherits it. What is taxed is what happens afterwards: the income the inherited asset earns is taxable each year, and capital gains arise when the asset is sold.
Key point: India has no inheritance tax or estate tax. Inheriting a property, shares, or money is not taxed. But the income those assets earn is taxable, and capital gains apply when you sell them, using the original owner's cost and holding period. Confusing tax-free inheritance with a tax-free sale is a common and costly error.
The Main Estate Planning Tools
A good plan usually combines several instruments rather than relying on any one. The main tools, and where each fits, are set out below.
| Tool | What It Does | Best Suited For |
|---|
| Will | States who inherits your assets after your death | Everyone; the foundation of any plan |
| Private family trust | Holds and passes assets under set terms, without waiting for probate | Larger estates, control across generations, dependent beneficiaries |
| Nomination | Names who receives an asset from the institution, as a custodian not owner | Bank accounts, shares, mutual funds, insurance |
| Gift during your lifetime | Transfers an asset while you are alive | Early succession, subject to clubbing and gift rules |
| Power of Attorney | Lets someone manage your Indian assets while you are abroad | NRIs managing property and accounts remotely |
| HUF | Holds ancestral or joint family property for a Hindu family | Hindu families with shared assets |
Wills, and the Limits of Will-Only Planning in India
A Will is the foundation of estate planning. It records who inherits what, names an executor, and can appoint guardians for minor children. Every adult with assets should have one, and NRIs are usually best served by a Will that deals specifically with their Indian assets, kept consistent with any Will covering assets abroad.
A Will alone, however, has real limits in India, and this is where families are often caught out:
- Probate can be required and slow. In Mumbai, Chennai, and Kolkata, a Will relating to immovable property generally needs probate from the court, which can take many months and sometimes years.
- Distribution waits on the court. Until probate or a succession certificate is granted, assets can stay locked and heirs cannot deal with them.
- Wills are open to challenge. A dissatisfied heir can contest a Will, which can turn succession into litigation.
- Every change needs formality. Amending a Will means fresh execution, and India has no strong institutional framework for administering estates.
Nomination Is Not Inheritance
Many NRIs assume that the person named as nominee on a bank account, demat account, or insurance policy will inherit it. That is not how Indian law works. A nominee is a custodian who receives the asset and holds it, but the ownership is decided by your Will or, if there is none, by the succession law. The courts have repeatedly confirmed that nomination does not override succession.
Nomination note: A nominee only holds an asset in trust for the legal heirs. Your Will or the applicable succession law decides who actually owns it. Relying on nomination alone, or leaving a nomination that contradicts your Will, is a frequent source of family disputes.
Estate Planning Through a Private Family Trust
A private family trust is one of the most effective estate planning tools, and it solves most of the problems that a Will alone cannot. You, as the settlor, transfer assets to a trust that holds them for your family under a trust deed, while you keep control and flexibility during your lifetime. On your death, the assets pass to the beneficiaries under the deed, without waiting for probate. The main advantages are:
- No probate delay. Assets in the trust pass under the deed, so beneficiaries are not held up by court proceedings.
- A strong, stable document. A well-drafted trust deed is harder to challenge than a Will and can be revised with far less friction.
- Professional administration. Trustees, including professional trustee services, manage and distribute assets without court intervention.
- Control and flexibility. As settlor you can retain control over the trust's assets and income during your lifetime without giving up ownership immediately.
- Planned, multi-generation distribution. Assets can be passed to current and future generations exactly as you intend, including to minor or dependent beneficiaries.
Which Succession Law Applies Without a Will
If a person dies without a Will, their estate is divided under the succession law that applies to them, which depends on their religion. A Will lets you override these defaults and decide for yourself.
| Who You Are | Law That Governs Succession |
|---|
| Hindus, Buddhists, Jains, and Sikhs | Hindu Succession Act, 1956 |
| Muslims | Muslim personal law (Sharia) |
| Christians, Parsis, and others | Indian Succession Act, 1925 |
| Anyone who leaves a valid Will | The Will governs, under the Indian Succession Act, 1925 |
FEMA: Holding, Inheriting, and Repatriating Indian Assets
For NRIs, estate planning has to work within FEMA, the law that governs how non-residents hold and move money and property in India. The key points are:
- NRIs can inherit Indian property. An NRI or OCI can inherit immovable property in India, including agricultural land, a farmhouse, or a plantation, which they are not allowed to purchase but may receive by inheritance.
- Repatriation has a limit. Sale proceeds of inherited assets can be repatriated up to USD 1 million per financial year from an NRO account, after taxes are paid.
- Certification is required to remit. Repatriation needs Form 15CA and a CA certificate in Form 15CB confirming that tax has been paid on the income or gain.
Cross-Border Estate Tax
India may not tax inheritance, but the country you live in might. The United States levies estate tax on US-situs assets of non-residents above a low threshold, and on the worldwide estate of US citizens and domiciliaries, and the United Kingdom charges inheritance tax based on domicile. So an NRI in the US or UK can have a tax-free inheritance in India and a taxable estate at home. This has to be planned on both sides, taking into account any double taxation avoidance agreement and, for US persons, their US tax reporting obligations.
Cross-border note: Estate planning for an NRI is a two-country exercise. India has no estate tax, but the country of residence often does, with its own rules on domicile, situs, and exemptions. The plan has to work under both systems at once, which is exactly where professional advice earns its place.
A Worked Example
Suppose you are an NRI and you inherit your parents' flat in Mumbai, bought by them in 1995 and now worth Rs 3 crore. The position is:
- Inheriting the flat is not taxed. India has no inheritance or estate tax, so receiving the property costs no tax.
- A later sale attracts capital gains. Your cost is taken from the original owner, with the option to use the fair market value as on 1 April 2001, and the holding period includes your parents' ownership, so the gain is long term.
- Nomination would not decide ownership. Even if a sibling was the nominee on a related account, the flat and the account pass under the Will or the succession law, not the nomination.
- A trust could have removed the delay. Had the flat been held in a family trust, it would have passed to the beneficiaries under the trust deed without waiting on probate.
How We Help with Estate Planning
- Asset and family review. We map your assets in India and abroad, your heirs, and your goals, so the plan fits your actual situation rather than a template.
- Structure selection. We recommend the right mix of Will, private trust, nomination, and gifts for your estate and your family.
- Drafting. We draft the Will or the trust deed and align your nominations and joint holdings so nothing contradicts the plan.
- Tax and FEMA check. We confirm the income tax, capital gains, and FEMA position of each asset, and the cross-border estate tax exposure in your country of residence.
- Execution and registration. We help execute and, where useful, register the Will or trust, and set up the trustee arrangements.
- Review. We review the plan as your assets, your family, or the law change, so it stays current and effective.
Common Estate Planning Mistakes
- Assuming a nominee inherits. A nominee only holds the asset; the Will or succession law decides who owns it.
- Not making a Will at all. Without one, your estate is divided by default succession law, which may not match your wishes and slows everything down.
- Ignoring probate delay. In Mumbai and some other cities, a Will relating to immovable property needs probate, which takes time and can be contested.
- Forgetting foreign estate tax. India has no estate tax, but the country you live in may, and that needs planning too.
- Letting documents contradict each other. A Will, a nomination, and a joint holding that point in different directions are a recipe for a dispute.
Why NRIs and Families Choose N D Savla & Associates
Estate planning sits across succession law, income tax, capital gains, FEMA, and often a second country's estate tax, and a plan only works if all of them agree. Our team builds the plan as a whole: we choose between a Will and a trust for your situation, draft the documents, align nominations and joint holdings so they do not fight each other, and check the tax and FEMA position of every asset. For NRIs we take the country of residence into account as well, so the plan holds up on both sides. The result is a clear, documented arrangement that passes your wealth to the people you choose, with the least tax, delay, and dispute.
Related Services
Frequently Asked Questions
What is estate planning?
Estate planning is arranging how your assets are managed during your life and passed on after death. It typically uses a Will, and often a private family trust, nomination, and gifts, so that wealth reaches the people you choose smoothly, with the least tax, delay, and dispute. For NRIs it also covers the FEMA and cross-border tax position of Indian assets.
Is there an inheritance tax or estate tax in India?
No. India abolished estate duty in 1985 and has no inheritance or estate tax today. Inheriting an asset is not taxed in the hands of the person who inherits it. However, income from the inherited asset is taxable each year, and capital gains arise when the asset is sold.
Do NRIs need a separate Will for their Indian assets?
It is usually advisable. A Will that deals specifically with your Indian assets, kept consistent with any Will covering assets abroad, makes succession clearer and faster and reduces the risk of conflict between documents across jurisdictions.
Is a nominee the owner of the asset?
No. A nominee is only a custodian who receives and holds the asset. Ownership is decided by your Will, or by the succession law if there is no Will. Indian courts have repeatedly confirmed that nomination does not override succession.
What is a private family trust and how does it help?
A private family trust holds your assets under a trust deed for the benefit of your family. It passes assets to the beneficiaries without waiting for probate, is harder to challenge than a Will, lets you keep control during your lifetime, and allows planned distribution across generations.
Do I pay tax when I inherit a property in India?
No tax applies on the inheritance itself. Tax arises only later: the rental or other income from the property is taxable, and capital gains apply when you sell it, calculated using the original owner's cost and holding period, with the option of the 1 April 2001 fair market value for older assets.
Can an NRI inherit agricultural land in India?
Yes. An NRI or OCI can inherit agricultural land, a farmhouse, or a plantation in India, even though they are not permitted to purchase such property. Inheritance is allowed; only purchase is restricted.
How much can an NRI repatriate from inherited assets?
An NRI can repatriate up to USD 1 million per financial year from an NRO account, after taxes are paid, using Form 15CA and a CA certificate in Form 15CB. Amounts above this generally need RBI approval.