For Non-Resident Indians (NRIs) with assets in both India and the UAE, securing their estate requires careful planning that considers the legal and financial landscapes of both countries. This involves understanding property rights, succession laws, tax implications, and available estate planning tools.
Understanding Property Ownership and Regulations
- India: NRIs and Overseas Citizens of India (OCIs) can own residential and commercial properties in India. However, they cannot purchase agricultural land, plantations, or farmhouses unless these are inherited or received as gifts. The Foreign Exchange Management Act (FEMA) governs property transactions by NRIs. NRIs don't need special permission to buy immovable property in India. Funds for property purchases should be maintained in a Non-Resident Account under FEMA and Reserve Bank of India (RBI) regulations.
- UAE: NRIs can legally purchase property in designated freehold areas in the UAE, such as Downtown Dubai, Palm Jumeirah and Dubai Marina. A valid passport is required, but a UAE residence visa is not mandatory. The Dubai Land Department (DLD) regulates the property market in Dubai, ensuring transactions are transparent and secure.
Estate Planning Tools and Strategies
- Wills:
- India: NRIs should prepare a will specifying beneficiaries and appointing a trusted executor to avoid disputes and delays in asset distribution. The will should meet the requirements of the Indian Succession Act, 1925 and be attested by at least two witnesses. It's advisable to register the will for stronger legal validity.
- UAE: NRIs can register a separate will for UAE-based assets through the Dubai International Financial Centre (DIFC) Wills and Probate Registry or the Abu Dhabi Judicial Department. This allows non-Muslims to apply the succession laws of their home country to their UAE assets.
- Global Will: A consolidated global will covering assets in both India and the UAE is another option, but it must be carefully drafted to comply with the legal formalities of both countries.
- Trusts:
- NRIs can consider setting up a private family trust to ensure long-term control and smooth wealth transfer. While India does not levy inheritance or estate tax, transferring property or shares to a trust may attract capital gains tax.
- Power of Attorney (PoA):
- NRIs can execute a PoA to authorize someone to carry out transactions on their behalf in India. The PoA holder can sign on the NRI's behalf and conduct property or loan-related transactions.
Tax Implications
- India: Rental income from property in India is taxable, with NRIs required to pay tax according to their income tax slab. They can claim deductions for property maintenance and home loan interest under Section 24(b) of the Income Tax Act. When selling property in India, capital gains tax applies. Long-term capital gains (for properties held for over two years) are taxed at 20% with indexation benefits. NRIs can repatriate sale proceeds through an NRO account, up to $1 million per financial year, after complying with tax regulations and submitting necessary forms. Gifts exceeding ₹50,000 in a financial year (except to specified relatives) are taxable in the recipient's hands.
- UAE: The UAE does not levy personal income or estate taxes. However, NRIs buying property in the UAE must be aware of Indian tax laws on overseas investments and capital gains.
Other Important Considerations
- Liberalised Remittance Scheme (LRS): Resident Indians can remit up to $250,000 every financial year from their Indian bank account, after providing their Permanent Account Number (PAN) to the bank, for purchasing property abroad.
- Double Taxation Avoidance Agreement (DTAA): India has a DTAA with the UAE, which exempts NRIs residing in the UAE from paying taxes on their income and investments in India if they are already paying taxes on the same in the UAE.
- Legal Assistance: It is essential to seek guidance from legal experts in both India and the UAE to ensure compliance with local laws and regulations. An Indian property lawyer in the UAE can help NRIs navigate the complexities of property dealings, contract scrutiny, dispute resolution, and tax implications.
By carefully considering these factors and seeking professional advice, NRIs can effectively secure their estate across India and the UAE, ensuring their assets are protected and their wishes are honored.
