With increasing global migration, many Non-Resident Indians (NRIs) inherit immovable assets in India. The FEMA rules for NRIs regulate how such inherited property may be acquired, held, transferred, or repatriated. These regulations are primarily governed by the Foreign Exchange Management Act, 1999 (FEMA) and directions issued by the Reserve Bank of India (RBI).

The official text of the law is available at the Government portal:
Foreign Exchange Management Act, 1999 – https://legislative.gov.in/sites/default/files/A1999-42.pdf

This article explains the legal framework applicable to inheritance, procedural requirements, judicial interpretation, and practical implications under FEMA rules NRIs must follow.

Conceptual Overview of FEMA Rules for NRIs

Definition of NRI under FEMA

Under Section 2(v) of FEMA, a person resident outside India includes individuals who stay abroad for employment, business, or any purpose indicating an intention to remain outside India for an uncertain period.

The Reserve Bank of India provides regulatory guidance through its Master Directions:
RBI Master Direction on Acquisition and Transfer of Immovable Property –
https://www.rbi.org.in/Scripts/BS_ViewMasDirections.aspx?id=10598

Meaning of Inheritance

Inheritance refers to the transfer of property to legal heirs:

  • Through a valid will, or

  • Under applicable succession laws such as:

    • Hindu Succession Act, 1956

    • Indian Succession Act, 1925

Indian Succession Act (official text):
https://legislative.gov.in/sites/default/files/A1925-39.pdf

Statutory Framework Under FEMA Rules for NRIs

The regulatory framework includes:

1. Foreign Exchange Management Act, 1999

Key provision:

  • Section 6(5) – Allows a person resident outside India to hold assets acquired when resident in India or received by inheritance.

Official Act:
https://legislative.gov.in/sites/default/files/A1999-42.pdf

2. FEMA (Non-Debt Instruments) Rules, 2019

These rules govern foreign investment and ownership of immovable property.

Official Rules:
https://dpiit.gov.in/sites/default/files/NDI-Rules-2019.pdf

3. RBI Operational Guidelines

RBI FAQs for NRIs on property transactions:
https://www.rbi.org.in/commonman/English/Scripts/FAQs.aspx?Id=26

Types of Property NRIs Can Inherit Under FEMA

Under current FEMA rules for NRIs:

Property Type Inheritance Allowed
Residential property Yes
Commercial property Yes
Agricultural land Yes (inheritance only)
Plantation property Yes (inheritance only)
Farmhouse Yes (inheritance only)

Important: NRIs cannot purchase agricultural land but may inherit it legally.

Rights, Duties, and Legal Obligations Under FEMA Rules NRIs

Ownership Rights

Under Section 6(5):

  • NRIs may hold inherited property without RBI approval.

  • Transfer is permitted to:

    • Resident Indians

    • Another NRI/OCI (subject to FEMA restrictions)

Repatriation of Sale Proceeds

NRIs may repatriate funds subject to:

  • Limit of USD 1 million per financial year

  • Submission of:

    • Form 15CA and Form 15CB

    • Chartered Accountant certificate

    • Documentary proof of inheritance

    • Tax clearance

Income tax provisions applicable to NRIs:
Income Tax Department – https://www.incometax.gov.in

Procedural Aspects for Claiming Inherited Property

Typical steps include:

  1. Obtain death certificate

  2. Establish legal heirship through:

    • Will and probate (if applicable)

    • Legal heir certificate or succession certificate

  3. Mutate property records in local municipal or revenue authority

  4. Open or use NRO account for income or sale proceeds

  5. Ensure tax compliance before repatriation

Probate procedures are governed under the Indian Succession Act:
https://legislative.gov.in/sites/default/files/A1925-39.pdf

Judicial Interpretation and Case Law

Indian courts have clarified inheritance rights of NRIs in multiple decisions:

  • Renusagar Power Co. Ltd. v. General Electric Co. (1994) – Recognised FEMA’s predecessor framework as regulatory, not prohibitory.

  • Courts have consistently held that inheritance is a legal transfer by operation of law and does not constitute a foreign investment transaction.

High Court decisions have also affirmed that agricultural land restrictions apply only to acquisition by purchase, not inheritance.

Judgments can be accessed through:
Supreme Court of India – https://main.sci.gov.in

Practical Implications for NRIs and Families

  • Maintain proper documentation (will, title records, tax receipts)

  • Understand FEMA repatriation limits

  • Agricultural land cannot be transferred to another NRI by sale

  • Rental income must be credited to an NRO account

  • Capital gains tax applies on sale based on indexation rules

Common Misconceptions About FEMA Rules for NRIs

Myth: NRIs cannot inherit agricultural land.
Fact: FEMA allows NRIs to inherit agricultural land. The restriction applies only to purchase, not inheritance.

Myth: NRIs need RBI approval to receive inherited property.
Fact: NRIs can inherit property without prior RBI approval under Section 6(5) of the Foreign Exchange Management Act, 1999.

Myth: NRIs can repatriate the entire sale amount without limits.
Fact: FEMA permits repatriation up to USD 1 million per financial year, subject to tax compliance and documentation.

Frequently Asked Questions

Can an NRI inherit property in India without RBI permission?
Yes. FEMA permits inheritance without prior approval.

Can inherited agricultural land be sold?
Yes, but only to a resident Indian.

Can NRIs repatriate the full sale amount?
Up to USD 1 million per financial year after tax compliance.

Is probate mandatory?
Probate is mandatory in certain jurisdictions such as Mumbai, Chennai, and Kolkata when inheritance is based on a will.

Which account should be used for sale proceeds?
An NRO account is typically used for receiving and repatriating funds.

Emerging Trends and Legal Developments

  • Simplification of FEMA through Non-Debt Instruments Rules, 2019

  • Increasing digital processing of Form 15CA/CB

  • Greater scrutiny of cross-border transfers under anti-money laundering norms

  • Growing use of estate planning and registered wills among global Indian families

RBI regulatory updates:
https://www.rbi.org.in

The FEMA rules for NRIs provide a structured and permissive framework for inheriting property in India. NRIs may legally inherit residential, commercial, and even agricultural property without prior RBI approval. However, compliance with documentation requirements, taxation laws, and repatriation limits remains essential.

Understanding the statutory provisions under the Foreign Exchange Management Act, 1999, RBI regulations, and related tax laws ensures lawful ownership, smooth transfer, and financial compliance. This framework reflects India’s regulatory approach—facilitating inheritance while maintaining oversight of cross-border financial flows.