In this guide
Indian parents with children settled overseas often assume that a Will, nominations and the absence of inheritance tax are enough to complete an estate plan. In reality, transferring Indian property, investments and bank balances to an NRI child involves succession law, income tax, FEMA rules, banking procedures and the child’s country of residence.
The goal should not merely be to decide who inherits. It should be to ensure the child can actually receive, manage, sell and repatriate those assets efficiently.
1. Make a Will—but Choose the Executor Carefully
A properly drafted Will is the foundation of succession planning, but it does not itself complete every post-death transfer. Banks, depositories, registrars and other institutions may still require estate-administration documentation.
An executor appointed under the Will can handle these formalities. The Indian Succession Act provides that probate, where required, is granted to the executor appointed by the Will.
For parents whose children live abroad, appointing an accessible person in India as executor can make administration significantly easier.
However, one correction is important: probate is not compulsory for every Will throughout India. Section 213 read with Section 57 limits the circumstances in which probate is legally necessary for specified classes of Wills and properties.
2. Consider a Trust for Complex Estates—Not as a Universal Tax Shortcut
A private family trust can be useful where parents want to:
- Provide lifetime support to a spouse;
- Divide different assets among different children;
- Control the timing of distributions;
- Manage assets for children living abroad; or
- Reduce dependence on post-death administration.
But saying that a trust automatically “avoids probate” is incomplete. Only assets validly transferred or settled into the trust are governed by the trust structure instead of passing under the Will.
Trustee selection also requires care. Under the Indian Trusts Act, a person domiciled abroad is specifically identified as not being a “proper person” for purposes of the beneficiary’s right to proper trustees, while the Act also contemplates replacement where a trustee leaves India to reside abroad.
A trust can therefore be useful, but its Indian and foreign tax consequences should be checked before assets are transferred.
3. Align Nominations With the Estate Plan
Nominations can dramatically simplify operational transmission, particularly for bank accounts and financial assets.
But a nominee should not automatically be assumed to become the ultimate beneficial owner of every asset.
For bank deposits, RBI expressly states that payment to the nominee discharges the bank, while the nominee receives the amount as trustee for the legal heirs and does not extinguish other succession rights.
Because nomination treatment can vary by asset class, review:
| Asset | Planning action |
|---|---|
| Bank deposits | Update nominee and align with Will |
| Mutual funds | Review folio nominations |
| Demat shares | Update depository nomination |
| Insurance | Review policy nominee/beneficiary rules |
| Property | Ensure title and Will are consistent |
A nomination is therefore a transmission tool—not a substitute for a properly coordinated succession plan.
4. An NRO Account Can Simplify NRI Inheritance
An NRI child does not necessarily need to wait until a parent’s death to open an Indian NRO account.
An NRO account can provide a practical Indian banking destination for inherited funds, investment proceeds and other legitimate rupee receipts.
RBI permits an NRI/PIO to remit up to USD 1 million per financial year from eligible NRO balances or sale proceeds of assets, including assets acquired through inheritance or settlement, subject to tax payment, documentary evidence and the authorised dealer bank’s satisfaction.
The USD 1 million limit should therefore be considered when a family has substantial Indian property or investments that an overseas child may eventually want to liquidate and move abroad.
It is an annual FEMA remittance facility—not an inheritance-tax exemption.
5. Inheritance May Be Tax-Free, but the Future Sale Is Not
Receiving property or money under a Will or through inheritance is not treated like an ordinary taxable gift under the Income Tax Department’s current guidance.
But subsequent income is different.
If an NRI child inherits:
- A rented property, the rental income can become taxable;
- Shares, dividends may be taxable;
- Deposits, interest may be taxable; and
- Property or investments later sold, capital gains can arise.
Most importantly, inherited assets generally do not receive a fresh cost equal to their market value on the date of inheritance.
The cost generally carries over from the previous owner. Section 73 of the Income-tax Act, 2025 retains this principle for assets received under a gift, Will, succession or inheritance.
For example, if a parent bought a property decades ago for ₹20 lakh and the NRI child later sells it for ₹1.20 crore, the computation does not simply begin with the property’s value on the inheritance date.
For long-term property gains, the current general rate is 12.5% without indexation for relevant transfers; the special resident-individual/HUF grandfathering option for old land/buildings does not extend in the same way to an NRI seller.
Can Parents Gift Money While They Are Alive?
Yes.
RBI permits a resident individual to make a rupee gift to an NRI/PIO close relative, credited to the recipient’s NRO account. The amount counts within the resident donor’s overall USD 250,000 per-financial-year LRS limit, along with the donor’s other LRS remittances.
This can be useful for gradual lifetime wealth transfer, but Indian tax, FEMA and the NRI child’s foreign-country gift/reporting rules should all be reviewed.
Frequently Asked Questions
Is inheritance received by an NRI taxable in India?
Receipt under a Will or inheritance is generally not taxed as an ordinary gift, but subsequent rent, interest, dividends or capital gains can be taxable.
Is probate compulsory for every Indian Will?
No. Probate requirements depend on the applicable succession law, location, community and property involved.
Does a nominee become the legal owner?
Not automatically. For bank deposits, RBI expressly treats the nominee as receiving the amount as trustee for legal heirs.
Can an NRI transfer inherited money abroad?
Yes, subject to FEMA, taxes and documentation. Eligible inherited assets can generally use the USD 1 million annual remittance facility.
Should parents create a trust for NRI children?
A trust can be valuable for larger or more complex estates, but it should be structured after reviewing Indian succession law, FEMA and the beneficiary’s foreign-country tax rules rather than treating it as an automatic tax-saving solution.
