This edition (#18) of the Succession Planning Series by M2K Advisors picks up from Part I and focuses exclusively on how India’s Foreign Exchange Management Act (FEMA), 1999 affects the inheritance of both Indian and overseas assets. It explains how FEMA treats property transfers based on whether you are a Person Resident in India (PRII) or a Person Resident Outside India (PROI). From the rules around inheriting Indian real estate to foreign securities and properties abroad, this blog outlines everything FEMA allows—and what it restricts. Whether you’re an NRI inheriting from family in India or an Indian inheriting from abroad, this edition breaks down the legal framework in simple terms, including the key FEMA rules and repatriation limits.
Foreign exchange regulations
FEMA regulates how foreign exchange transactions take place in India, and inheritance through wills is no exception. The way FEMA applies to inherited assets depends entirely on the residential status of the person involved—whether they’re a PRII (Person Resident in India) or PROI (Person Resident Outside India).
Residential Status Provisions
Here’s how FEMA classifies people for this purpose:
Person resident in India (PRII)
Someone is treated as a PRII if they have resided in India for more than 182 days during the previous financial year, with some exceptions. The following are not treated as PRIIs:
- A person who has left India for employment, business, or for an indefinite stay abroad
- A person who has come to India for employment, business, or any other purpose indicating intent to stay long term
In short, it’s not just about days—it’s also about intent.
Person resident outside India (PROI)
Anyone who does not qualify as a PRII is treated as a PROI. This includes NRIs, OCIs, and foreign nationals.
Understanding this distinction is critical because FEMA’s inheritance rules change depending on which side of this line you fall.
Inheritance of Indian assets
If you’re a PROI—say, an NRI living abroad—and you inherit assets located in India, FEMA governs what you can own, transfer, or repatriate.
Section 6(5) of the FEMA Act
This section makes it clear:
A PROI can hold, own, transfer, or invest in:
- Indian currency
- Indian securities
- Immovable property in India
Only if those assets were either: - Acquired while they were a PRII
- Or inherited from someone who was a PRII
So, if your parents or grandparents lived in India and owned assets here, you are allowed to inherit them even if you now live abroad.
NDI Rules and Inheritance by NRIs/OCIs
The Non-Debt Instruments Rules, 2019 (NDI Rules) go a step further:
- NRIs or OCIs can acquire immovable property in India via inheritance even if the deceased was a PROI, provided the deceased had originally acquired the property in accordance with FEMA, or had inherited it from a PRII.
This allows cross-border inheritance across generations, as long as the original acquisition was legal under FEMA.
When FEMA does not apply
If a PRII inherits Indian assets from another PRII—and the assets are located within India—FEMA does not apply. This is considered a purely domestic transfer.
Transfer and sale post-inheritance
Once the inheritance is complete, any sale or further transfer by the beneficiary must comply with FEMA and NDI Rules.
For example:
- If an NRI sells an inherited property in India, the sale proceeds must be credited to their NRO (Non-Resident Ordinary) Account
- An NRI can repatriate up to USD 1 million per financial year from these proceeds, under current RBI guidelines
This cap applies to all forms of repatriation, not just inherited property—so careful planning is needed.
Inheritance of overseas assets
Now let’s look at the reverse situation: when an Indian resident inherits foreign assets from someone who lived abroad.
Section 6(4) of the FEMA Act
Section 6(4) states that a PRII is allowed to hold, own, transfer, or invest in:
- Foreign currency
- Foreign securities
- Immovable property situated outside India
…but only if those were:
- Acquired while the PRII was a PROI (e.g., when they lived abroad)
- Inherited from a person who was a PROI
So, if you’re now living in India but inherit a house in London from your aunt who lived in the UK, FEMA allows you to hold and manage it.
Overseas Investment Rules, 2022
The Foreign Exchange Management (Overseas Investment) Rules, 2022 further clarify:
- A PRII can inherit foreign securities or overseas real estate from a PRII, provided the original asset was acquired under FEMA
- Inheritance is also allowed from a PROI, even if the asset is located abroad
This means Indian residents can legally inherit offshore property or shares from both NRIs and fellow Indian residents—so long as the chain of ownership complies with FEMA.
It closes a key loophole and provides legal clarity for families with foreign-held wealth.
Succession Knowledge Series
This edition is one part of M2K Advisors’ extensive Succession Planning Series—built to help individuals and families understand how Indian law treats inheritance, wills, taxation, trusts, and more.
The complete series includes:
- An Introduction to Succession Planning
- Types of Succession in India
- Hindu Succession Act – An Introduction
- Rules of Intestate Succession – Male (Part 1 & 2)
- Succession for Hindu Females
- Key Aspects in Hindu Succession Act
- Christian Succession Rules
- Introduction to the Indian Succession Act
- Drafting a Will
- Will Registration, Probate & Letters of Administration
- Attestation, Alteration & Revocation of Wills
- Bequests & Legacies under the Will
- Contesting a Will & Legal Safeguards
- Taxation of Trusts (Parts I–IV)
- Other laws relating to Wills – Part I & II
- Landmark Legal Judgments on Wills
Every alert is written by tax and legal professionals who understand the practical gaps families face—and how to avoid them with clear compliance and documentation.
You can catch up on past editions here:
🔗 https://www.m2kadvisors.com
