OCI cardholders can inherit land in India
I reside in the UK and am eligible to apply for British citizenship. But before I do so, I would like to know what options I have regarding the following: public provident fund (PPF) in which I have invested for the past eight years at a post office; mutual funds with SBI and HDFC; LIC Jeevan Anand insurance expected to mature in 2027; HDFC Young Star Udaan policy; and savings accounts with SBI and HDFC Bank. As a foreign citizen, can I inherit either a small portion of agricultural land or residential property from my mother?
If you have been residing in the UK for long, your residential status may already be of a non-resident for the purpose of taxation in India. Once you are an NRI, you can no longer maintain a resident bank account in India. As per RBI rules, you must redesignate your resident bank accounts as NRO accounts or NRE accounts. Perhaps you may choose to merge balances in various accounts and continue one single NRO account, which would make things easier for you in terms of maintaining and complying with various requirements related to reporting and taxes. You may also consider opening an NRE account to deposit foreign earnings in India.
As an NRI, there are likely to be restrictions on how you make investments in mutual funds, shares, etc. in India and there may be additional compliance requirements.
An NRI cannot open a PPF account; however, if the status of the resident holder of a PPF account changes subsequent to the opening of the account, then such an NRI can hold the investments in PPF till maturity. As discussed, you must convert your resident accounts to NRO, NRE or Foreign Currency Non Resident accounts immediately, if you have not already done so.
Any income that arises from India shall be taxable in India for you. TDS shall be deducted on your capital gains before these are credited to your account.
NRIs are not allowed to acquire agricultural land in India. However, an NRO who is a citizen of India or an overseas citizenship of India cardholder can inherit agricultural land or any immovable property in India from a person resident in India. Do note that in case you decide to sell such agricultural land, it can only be sold to a person resident in India.
Archit Gupta is founder and chief executive officer, ClearTax.