Introduction
For Non-Resident Indians (NRI’s), managing Indian assets while you or your children are living abroad is a bit difficult task. It’s a vital role for all of the NRI’s parents that they transfer the Indian wealth to their children in a seamless manner. Navigating inheritance laws and estate planning can create problems, especially when dealing with property and assets in India. This article guides the process and provides key insights on how NRI parents can effectively transfer their Indian assets to their children living abroad.
What is Estate Planning ?
In common parlance, Estate planning is a process of how you want to distribute your wealth and assets if you are no longer in the world. In addition to that, it can be handled according to your wishes. It helps and also give supports to your children/heirs when they are in actual need of it.
Key Components of Estate Planning that every NRI should think of!
1. Gift : One of the easiest ways to transfer Indian assets to the children is a GIFT. Gift Deed plays a vital role in this component and ensuring that how you manage the tax implications in the India and the off-shore countries where you transfer the funds that you received as gift.
2. Will: A well-crafted Will is a must. It highlights that how the assets/properties are distributed to your children/heirs as per your wishes.
3. Trusts: Incorporating a private trust provides a structured way to manage and distribute your assets. It helps to reduces estate taxes and also creates a separate entity that can be easier way when the assets are distributed among children.
4. Family Offices: For Ultra High Net Worth Individuals, setting up a family office can manage complex estate planning needs along with an efficient solution to wealth management of the family.
- Appointing an executor for your Will or a trustee for your trust is significant. This appointed person will handle the management and distribution of your assets in India when you are no longer. It’s advisable to start estate planning as early as possible to avoid complications later.
- Every NRI Parent should add their children as nominees in your will, so it helps to transfer the assets in the easiest way. In my opinion, every NRI parents should insist to their children that they open an Non-Resident Ordinary (NRO) / Non-Resident External (NRE) Account in India, so it becomes very easy to transfer the funds to abroad whenever the assets are realized by them.
Taxation of Inherited Indian Assets
While there is no direct taxation on inherited indian assets but selling these assets can attract income tax. If you/your children want to repatriate the funds from India to the city where you are living then we need to the tax implications in India as well in the country where you reside.
Every NRI must know about that for any funds you earned or received in the NRO account, you cannot remit those funds in the NRE account or to a foreign account until you pay the taxes on that income. While repatriating the funds, you also need to file Form 15CA-CB which ascertain that you have pay the taxes on it and if not then under what provisions you have taken the relief of the same. It ultimately tells that whether the appropriate tax has been levied or not. If not levied, then under what provisions the assesse has taken the benefit of it, it might be under Double Tax Avoidance Agreement (DTAA) or any specific provisions/rules of the Income Tax laws.
FEMA Regulation while repatriating the funds
Under FEMA (Foreign Exchange Management Act) regulations, NRIs or Persons of Indian Origin (PIOs) can repatriate up to $1 million from an NRO account each financial year. You can refer a detailed article of mine through the below link : https://taxguru.in/rbi/capitalizing-1-million-scheme-transfer-non-resident-funds-india.html
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Disclaimer: All views expressed in this article are personal and belong solely to the authors and do not represent those of people, institutions, or organizations that the authors may or may not be associated with within a personal or professional capacity unless explicitly stated. The content of this article is for informational purposes only and should not be construed as professional advice or judgment whatsoever. The readers should not construe the material contained herein as business, financial, legal, regulatory, or professional advice. In case of any query or assistance, you can drop an email to [email protected]
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