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How NRIs can handle deceased family member’s financial assets in India
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Must do’s for managing financial assets of a deceased family member
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Registering the death of a family member
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Filing taxes for a deceased relative
The below content is purely for informational purposes and is not intended to constitute advisory of any kind. Please note, these are in-depth articles which are best viewed on large screen devices like laptops, desktops and tablets. The position reflected in this article has been updated as of July 15, 2024.
Managing the financial assets of a deceased family member in India can be an overwhelming task for Non-Resident Indians (NRIs) who are not familiar with the legal framework in India. In this article, we will explore how NRIs can manage the financial assets of a deceased family member.
As such, while this article sets out key aspects on the matter and primarily deals with demise of a person domiciled in India, you should consult an expert and seek legal advice in respect of applicable legal procedures and regulations of the country of domicile of the deceased family member.
Inheritance of a deceased family member
When a person passes away without writing a valid will i.e., intestate succession, the assets of the deceased person are inherited as per the relevant succession laws applicable to the relevant community in India. These assets typically constitute real estate and financial assets. The financial assets broadly include equity and debt investments, bank accounts and term deposits, insurance policies, gold and cash and its equivalents.
Given that most financial assets could be considered as movable property, it is important to note that as per the Indian Succession Act, 1925*, succession to a moveable property of a person deceased is regulated by the law of the country in which such person had his domicile at the time of his death.
*Section 5(2) of Indian Succession Act, 1925 states that succession to the moveable property of a person deceased would be regulated by the law of the country in which such person had his domicile at the time of his death.
Accordingly, in the event of demise of an NRI or any immediate family member of an NRI (who could also be an NRI) holding financial assets in India, the family members of the deceased individual would also have to evaluate the applicable laws of the country of domicile of such deceased individual for transmission of the financial assets of the deceased individual in India.
It is always advisable to consult an expert and seek legal advice in respect to applicable legal procedures and regulations of the country of domicile of the deceased family member.
Managing financial assets of a deceased family member
Before the financial assets of a deceased family member can be transferred in the name of relevant beneficiaries, the beneficiaries must complete legal procedures and formalities in India for transmission of such financial assets. Additionally, if the deceased family member had obtained a life insurance policy in India, then upon his/her demise, the beneficiary should make a claim with the insurance company as per the terms of the insurance policy.
Did you know?
If the deceased family member has already written a will, the assets would be transmitted to the beneficiaries after compliance with the procedural formalities under law If the deceased had set up the trust, then the financial assets would be managed by the trustee for the benefit of the beneficiaries as stipulated in the relevant trust deed.
Let’s look at some of the key factors to be considered while managing the financial assets of a deceased family member. It is important to note that the specific rules and regulations will vary depending on the asset type.
1. Bank accounts, fixed deposit, safe deposit lockers and other bank assets
For closing of deceased's bank accounts, safe deposit lockers, fixed deposits, etc. of the deceased in India and transferring the underlying balances and articles, one would have to follow the policies and guidelines of the relevant bank.
Usually when there is a nominee provided to the bank, the nominee will be required to furnish details of the deceased’s bank accounts, death certificate and Know Your Customer (KYC) documents of himself/herself.
If the deceased’s bank account does not have a nominee, the bank would transfer the account balance only to the legal heirs of the deceased. Please note that a nominee only acts as a custodian of the financial assets of the deceased person till the legal heirs are determined or the financial assets are transferred as per the will of the deceased.
Upon demise of an Indian resident where the beneficiary is an NRI (which could include the deceased’s parents, spouse or children who are NRIs), the beneficiary may have to execute:
- Bank specific documentation in the presence of bank’s officials at foreign offices
- Documentation in presence of Indian embassy officials
- A Power of Attorney (PoA) in favour of an Indian resident (if required) to take up the relevant formalities in India
Similarly, if the beneficiary is a resident in India, such beneficiary would also be required to comply with the processes established by the bank for the transfer of the deceased’s financial assets.
2. Scrips, securities and other financial investments
For the transmission of any financial investments such as mutual funds, securities, scrips, stocks, bonds and other financial instruments, the relevant processes prescribed under law, by the issuer, stock exchanges etc. would require to be followed by the nominee or the legal heir, as the case may be.
You should inform the relevant bodies, financial institutions, banks, brokers, etc. of the death of the investor along with the death certificate of the deceased, your KYC documents, and other paperwork to proceed with transferring the financial
Did you know?
The Securities and Exchange Board of India (SEBI) has made it mandatory for individual investors to nominate a person who can claim the securities held by them in their demat accounts or the redemption proceeds thereof (in respect of mutual fund units) in the event of demise of the investor. Further, an investor can also choose opting out of nomination through prescribed declaration form*.
*Section 13 of the Registration of Births and Deaths Act, 1969
Inheriting deceased’s assets by an NRI: Key documents
In order to streamline the claim process and ensure a smooth transfer of the inherited assets, an NRI should seek the following key documents of a deceased family member in India:
1. Registration of death/death certificate: A death certificate is an official document of proof of demise. A death certificate should be obtained within the specified period which may be subject to state specific legislation and in any event within 30 days of demise. If the death certificate is not registered within this timeline, the following would apply:
- After expiry of 30 days till one year of death: the registration would require an affidavit made before a notary public or any other officer authorised in this behalf by the state government along with prescribed fee; and
- After expiry of 1 year of death: the registration would require an order made by a magistrate of the first class or a Presidency Magistrate along with the prescribed fee
Did you know?
In the event of demise of an Indian national outside India (resident or NRI), the event of death is required to be registered at the Indian embassy/consulate by the respective country in accordance with applicable laws. Further, the registrar in the relevant area/jurisdiction in India would register the death of an Indian citizen outside India on the basis of information received relating to registration of such death at the Indian consulates**.
** Section 20 of the Registration of Births and Deaths Act, 1969
2. Succession certificate and legal heir certificate: In case a person passes away without writing a valid will, succession certificate and legal heir certificate would be required. The certificate establishes the relationship between the deceased person and the legal heir and allows the legal heirs to claim a right over the debts and securities of the deceased person.
3. Documents evidencing ownership of financial assets: The beneficiaries must locate and gather the underlying documents pertaining to the financial assets of the deceased like copies of insurance policies, documents evidencing ownership of financial instruments i.e. fixed deposits, mutual funds, shares, etc.
Filing taxes: Ensuring tax compliances on behalf of the deceased
Filing taxes for a deceased family member is crucial step in settling their financial affairs. There are two scenarios involved:
1. Till the date of demise/death: As per the income-tax law, if an individual passes away during the financial year, the obligation to file their tax return up to the date of their death/demise falls upon their legal representative/ legal heir. Post death of the deceased, the legal representative/legal heir must register themselves as 'representative assessee' on the income-tax portal to file the return of the deceased person.
To have a comprehensive understanding of the process, you should consult a tax and legal expert.
2. Post the date of demise/death: Subsequently, for the remainder financial year (i.e., post-death), the responsibility for filing return shall be on the executor (a person administering the estate of a deceased person) of the estate of deceased until the assets are distributed to the legal heir.
Please note that once the assets are transferred, any income generated from those assets becomes taxable income for the legal heir.
Conclusion
In India, NRIs face a multi-faceted and lengthy process while managing inherited financial assets of a deceased family member. This includes a review of investment portfolio of the deceased, notifying the relevant authorities, acquiring the death and succession certificates etc. Claiming and transmitting assets may also necessitate adherence to individual institution policies. Furthermore, ensuring tax compliance for the deceased is crucial. You should consult a tax and legal expert for more details.
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The contents of this article/infographic are meant solely for informational purposes. The contents are generic in nature and are not intended to serve as a substitute for specific advice on any matter whatsoever. The information is subject to updation, completion and verification and the applicable norms may keep changing materially from time to time. This information is also not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to applicable laws or would subject ICICI Bank Limited/its affiliates to any licensing or registration requirements. ICICI Bank Limited/its affiliates and their representatives shall not be liable for any direct or indirect losses or liability incurred arising in connection with any decision taken by any person on the basis of this content. Please conduct your own due diligence and consult your financial advisor before making any decision. Terms and conditions of ICICI Bank and third parties apply. ICICI Bank is not responsible for third party services. Nothing contained herein shall constitute or be deemed to constitute an advice, invitation or solicitation to avail any products/ services of third parties.