• Inheritance of property by a US citizen from OCI living in India

We are 2 brothers. Our father,an Indian,died in1990 leaving a regd Will to jointly acquire his house . The was indivisible equally into 2 equal portions. We continued in that house together. My sons are US citizens. I moved to US and became a US citizen and an OCI in 2008. I have been coming to India.
      In 2010 we jointly decided to redevelop the inherited house into 4 storeybuilding each storey having an independent residential flat through a Builder with aproviso that he would meet entire cost of construction and all charges  and give us two floors- one for me and one to my brother. These were individualy registered in our names in 2013. Since then, I am living in my ininheritd flat continuously having hardly any intention to to return to US.
     Against the above background, I have two questions for your expert advice:
       (1). Can I Will my inherited flat to my two sons who are US citizens so that they could sell it whenever they want and tranfer the proceeds in equal share in their accounts in US?
        (2). Can I sell the flat myself and transfer the proceeds to them through LRS and live in rented house? I had no income in US. I am a Tax payer in India and my assessment is up-to- date. I am a pensioner in Infdia.
I shall be grateful for your best advice.
 K. K. Mohindra
Asked 6 months ago in Property Law from United States
Religion: Hindu
Answer to both your questions are that you absolutely can. No bar in leaving bequests to people who do not have the indian citizenship.

Saptarshi Banerjee
Advocate, Kolkata
183 Answers
4 Consultations
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1.  Former Indian Citizens who now hold foreign citizenship can inherit immovable property of every kind in India. Inherited property can be residential, commercial, agricultural or even plantation and farm land. Furthermore, once inherited, such property need not be sold and can be kept if desired. You can also will your property to anyone you desire. The will would have to be probated by them post your lifetime if the property is situated at the place where probate is mandatory for a bequest. 

2. You are free to sell the property and remit the sale proceeds to them.
Ashish Davessar
Advocate, Jaipur
18057 Answers
445 Consultations
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1) you can execute will bequeathing your flat to your 2 sons . 

2) the sons would be at liberty to sell the flat if they so desire 

3) you can sell the flat during your lifetime 

4) the sale proceeds must be credited to the NRO account. You can repatriate up to USD 1 million per calendar year from your NRO Account (including all other capital transactions), provided you have paid all taxes due.
Ajay Sethi
Advocate, Mumbai
23118 Answers
1214 Consultations
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as mentioned earlier you are at liberty to sell your flat in India


 general permission is available to the NRIs/PIO to repatriate the sale proceeds of the immovable property inherited from a person resident in India subject to the following conditions:
(i) The amount should not exceed USD one million, per financial year (ii) This is subject to production of documentary evidence in support of  inheritance of assets and an undertaking by the remitter and certificate by a Chartered Accountant in the formats prescribed by the Central Board of Direct Taxes vide their Circular No.4/2009 dated June 29, 2009 (iii) In cases of deed of settlement made by either of his parents or a close relative (as defined in section 6 of the Companies Act, 1956) and the settlement taking effect on the death of the settler (iv) the original deed of settlement and a tax clearance / No Objection Certificate from the Income-Tax Authority should be produced for the remittance (v) Where the remittance as above is made in more than one installment, the remittance of all such installments shall be made through the same Authorised Dealer (vi) In case of a foreign national, sale proceeds can be repatriated if the property is inherited from a person resident outside India with the prior approval of the Reserve Bank. The foreign national has to approach the Reserve Bank with documentary evidence in support of inheritance of the immovable property and the undertaking and the C.A. Certificate mentioned above.
Ajay Sethi
Advocate, Mumbai
23118 Answers
1214 Consultations
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(1). Can I Will my inherited flat to my two sons who are US citizens so that they could sell it whenever they want and tranfer the proceeds in equal share in their accounts in US?

You can bequeath your share of property or the properties lying in your  name to your sons or to anyone of your choice, there is no legal infirmity in it. Your US citizen sons can inherit the property without any problem and they can take possession and enjoy the same as absolute owners as per the terms of inheritance.  If they are the absolute owner, they have the right to dispose the property in the manner and mode of their desire ad choice. However they may have comply with the formalities  for transferring the funds derived  out   of the sale proceeds to their US accounts.





(2). Can I sell the flat myself and transfer the proceeds to them through LRS and live in rented house? I had no income in US. I am a Tax payer in India and my assessment is up-to- date. I am a pensioner in Infdia.
I shall be grateful for your best advice.

You can very well sell the property and transfer the funds out of the sale proceeds to your sons ar abroad by observing the guidelines stipulated by RBI with regard to transfer of funds to a person at abroad under the provisions of FEMA.
T Kalaiselvan
Advocate, Vellore
13934 Answers
127 Consultations
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My second question perhaps remains unanswered. Could you please explain it in some detail. A one liner reply really bypassed me. Could I sell my inherited flat as an OCI living in India & remit the proceeds to my US citizen sons as per existing laws either Indian or US.  This is an arrangement when I am alive.

Yes you can proceed with the sale of the property inherited by you in India though you are an OCI and for transfer of the funds either on your name or your sons names, you may have to follow the RBI guidelines as envisaged in the FEMA in this regard.  I dont think you should have any problem to do so as per your desire.






your advice about which is quite clear to me. I shall be happy to receive a somewhat detailed ,easy to grasp and understand advice about question no (1).. I am past 85 and comprehension with age gets retarded. I am sure you would certainly make things clear to me. 

As far as your property is concerned you can adopt one of the following step for its disposal

1)  You can bequeath the properties in the names of your sons who will  be able to acquired them jointly or as per the terms mentioned in the last will of testament.  The will shall come into force after  your  lifetime only.  The beneficiaries can enforce the Will bequest easily once the Will is a registered properly before the concerned registrar's office.


2)  You can make a registered gift deed settlement of the property equally in favor of your sons with the condition of lifetime interest for you in the property so that they both can take possession and enjoyment of the property as joint owners after your life time.



3) You can dispose the property and either transfer them to their foreign account now itself by observing the formalities of the law for this purpose or can  deposit  this amount in a fixed deposit in a nationalised bank making them both as nominees to avail the amount after your lifetime.

Besides above, you can even have a thought of enforcing any other idea you may find it suitable to your prevailing circumstances.
T Kalaiselvan
Advocate, Vellore
13934 Answers
127 Consultations
5.0 on 5.0
Hi, For your first question you can bequeath the property by way of will to any body including your sons.

2. Second question:- If you want you can sell the property  and transfer the sales proceeds to your legal heirs.
Pradeep Bharathipura
Advocate, Bangalore
4104 Answers
133 Consultations
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Respected sir, 

Back ground: 
Since your father has left behind a registered will and thereafter his children(you and your brother) had inherited it in the year 1990, this property is a self acquired property in your hands. (property acquired through will is a self acquired property). 
Also subsequent to you entering in to joint development agreement, you have registered the floor allotted to you in the year 2013 in your name. 

Answers to your Query:
Option 1: Executing a registered  "WILL": You can execute a registered will at the nearest sub registrar office in presence of two reliable witnesses in favor  of your sons/ whomsoever you wish to inherit the property after your time. 

1.1 Your children can sell the property after inheriting the same from you (after your life time) in equal shares and repatriate the proceeds  to USA. 

1.2 There is no restriction whatsoever on US Citizens inheriting properties in India.

 Taxation Impact in case of inheritance of properties through Registered Will: 
 
1.3 There is no inheritance tax or any tax payable when the property transfers from you to your children through Will or other inheritance. 

1.4 However capital gains will be applicable at the time of sale of property by your sons at the rates as applicable at the time of sale.  

1.5 Currently the capital gains tax is 20% for properties held for more 3 years and capital gains tax is 30% if the properties are sold within 3 years from date of inheritance. Also in case of inheriting the property through Will, your children can compute their capital gains tax after claiming several benefits under income tax (i.e the market value of your property when registered in the year 2013 will be the cost of acquisition), benefits under Section 54 and pay a lower capital gains tax. 

1.6 Also because of existence of Avoidance of double tax treaty between USA and India, if capital gains taxes are paid in india, No tax need to be paid in USA on the monies so received by your sons. 

Query 2:
2.1 You can choose to sell the flat and then transfer the proceeds to them.
2.2 It will not be prudent now  to sell the flat and become liable to pay capital gains tax  again and that too at 30% tax slab as in all likelihood you might have paid capital gains at the time of Joint development agreement in the year 2010 or 2013. 
2.3 Since you are planning to repatriate the entire money to your children now, in all probability you might not even want to explore the options available under Section 54 of Income Tax act and hence will be liable to pay 30% capital gains tax.
2.4 Once you repatriate the monies to your sons, the US Government will treat it as income  or Gift  and hence levy tax on the remittance. The reason is the monies so transferred by you is not Inheritance in any manner.
So in option 2 the disadvantages are 
a) Capital tax liability of 30% at the time of sale. 
b) Remittance made by you in favour of your children liable to tax in USA. 
c) In addition to above tax outgo, you needing to lead a life outside of your own home. 
  
It appears to me that you are a great  human being who is willing to sacrifice comforts for the sake of your children and also that you intend to settle all of your assets in favour of your children ( succession planning) in your life time. 

In our view, the First option is more advantageous than the  Second option stated by you. 

hope this helps.
Rajgopalan Sripathi
Advocate, Hyderabad
869 Answers
43 Consultations
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You can always alienate the title to a property as long as your title to such property is clean. and once you have alienated such property the proceeds of such sale is for yours to decide upon. If you wish you may give them to anyone of your choice Indian or not.

There is absolutely no bar on you to either leave these properties as bequests to people indian and/or foreigners and/or non-indians. or sell them yourselves and then give the proceeds of such sale to anyone of your choice. 

the only thing to see id if the title of the property is clean or not.
Saptarshi Banerjee
Advocate, Kolkata
183 Answers
4 Consultations
4.9 on 5.0

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