What Are Indian Inheritance Laws and Taxes for U.S. Citizens?

The short answer: India imposes no inheritance tax and no estate tax, and an heir who receives Indian property by will or inheritance owes no Indian income tax on receiving it. For a U.S. citizen with a flat in Mumbai or a family home in Gujarat, that removes the problem that dominates planning in Europe. What remains is a set of structural issues that Indian-American families encounter constantly. Indian law, not U.S. law, governs succession to Indian real estate no matter where the owner lived. Which Indian law depends on the deceased’s religion. Foreign exchange rules limit how much an heir can take out of India each year. And the American revocable living trust, the foundation of most U.S. estate plans, has no clean counterpart in Indian law and can create Indian tax and regulatory problems if it touches Indian assets.

This article explains which law governs what, how India taxes an inheritance and a later sale, how the exchange control rules affect U.S. heirs, why U.S. trusts fit poorly, and what a U.S. citizen with Indian ties should have in place. It is a guide to the conversation with an Indian advocate and chartered accountant, not a substitute for one.

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Which Law Governs a U.S. Citizen’s Indian Estate?

Section 5 of the Indian Succession Act, 1925 draws the line that matters. Succession to immovable property in India is regulated by the law of India “wherever such person may have had his domicile at the time of his death.” Succession to movable property is regulated by the law of the country where the deceased was domiciled at death.

For a U.S. citizen domiciled in New Jersey, the result is a split estate. The house in Ahmedabad and the flat in Bangalore pass under Indian law. Indian bank accounts, shares, mutual funds, and other movables pass under New Jersey law. A U.S. will can govern the movables, and its validity will be judged largely by U.S. standards. Indian real estate requires a will that satisfies Indian formalities, or it passes under Indian intestacy rules.

Which Indian Law Applies? Religion Decides

India has no single succession code. The applicable law depends on the religion of the deceased. Hindus, Sikhs, Jains, and Buddhists are governed by the Hindu Succession Act, 1956, which sets out who inherits when there is no will and, in Section 30, confirms that a Hindu may dispose of any property by will. Christians, Parsis, Jews, and others are governed by the Indian Succession Act, which likewise allows complete testamentary freedom. Muslims are governed by Muslim personal law, under which a person may bequeath only one-third of the estate by will without the consent of the heirs; the rest passes in fixed shares.

For most Indian-American families, the practical point is that Indian law, like U.S. law, lets a Hindu or Christian testator leave property as they wish. There is no forced heirship of the European kind. The danger is intestacy. A U.S. citizen who dies without an Indian will, or whose U.S. will does not meet Indian formalities, leaves Indian real estate to pass under religion-based intestacy rules that may divide it among a spouse, children, and parents in ways the family never intended.

Does India Tax an Inheritance?

No. India abolished estate duty in 1985 and has no inheritance tax, gift tax on inheritances, or wealth tax. Property received under a will or by inheritance is expressly excluded from taxable income under the Income Tax Act. An heir, resident or non-resident, owes nothing to India on receiving Indian property.

The tax arrives on sale. When an heir sells inherited property, Indian law treats the heir as having acquired it at the original owner’s cost and on the original owner’s acquisition date. For property held more than 24 months, the gain is long-term and, for transfers on or after July 23, 2024, taxed at 12.5 percent without inflation indexation for non-resident sellers. A buyer purchasing from a non-resident must withhold Indian tax at source, and the seller then files an Indian return to reconcile. For property the original owner bought decades ago, the taxable gain can be most of the sale price.

U.S. tax runs in parallel. A U.S. heir takes a stepped-up basis equal to the property’s value at the original owner’s death, so the U.S. gain is usually far smaller than the Indian one. Indian tax paid on the sale can generally be credited against U.S. tax on the same gain under the U.S.-India income tax treaty, but the two calculations start from different bases and rarely match. There is no U.S.-India estate or gift tax treaty. The United States taxes its citizens on their worldwide estate with a basic exclusion of 15 million dollars for 2026, so most Indian-American estates owe no federal estate tax, but Indian assets count toward that figure.

Can a U.S. Citizen Inherit and Keep Indian Property?

Yes, with conditions set by the Foreign Exchange Management Act and Reserve Bank of India regulations rather than by succession law.

A non-resident Indian or an Overseas Citizen of India cardholder may inherit any immovable property in India, including agricultural land, plantation property, and farmhouses that they could not buy. A foreign national with no Indian origin may inherit Indian property from a person who was resident in India. Inherited agricultural land may be held but not farmed commercially and may be sold only to a resident Indian.

The constraint that surprises U.S. heirs is repatriation. Proceeds from inherited Indian assets can be remitted abroad only up to one million dollars per financial year, through a non-resident ordinary bank account, with a chartered accountant’s certificate and tax filings confirming that Indian taxes have been paid. A U.S. heir who sells a three-million-dollar property in India will need at least three years to bring the money home. Larger amounts require specific Reserve Bank approval. Heirs who leave money in India in the meantime must report the accounts on U.S. foreign account filings.

How Does India Treat an American Trust?

Poorly, in three different ways.

Indian trust law exists, in the Indian Trusts Act, 1882, but it was written for domestic trusts. The Act treats a person domiciled abroad as unsuitable to serve as trustee of an Indian trust, and Indian land registries are generally unwilling to record a foreign trust or a foreign trustee as owner of Indian real estate. A New Jersey revocable trust cannot, as a practical matter, hold title to a house in Delhi.

Indian tax law then treats trusts by their terms. Income of a revocable trust is taxed to the settlor. Income of a discretionary trust, one where beneficiaries’ shares are not fixed, is taxed to the trustee at the maximum marginal rate, which with surcharges can approach or exceed 40 percent. Neither treatment resembles the U.S. grantor trust rules, and a U.S. trust with Indian income can face Indian tax at rates the U.S. trustee never anticipated.

Exchange control adds the third layer. The foreign exchange regulations say almost nothing specific about private trusts, and the Reserve Bank’s position is that a trust cannot be used to do indirectly what a non-resident could not do directly. A trust with non-resident trustees or beneficiaries holding Indian property therefore operates in a gray zone, and Indian banks and registrars resolve gray zones by refusing.

The practical guidance for Indian-American families is consistent: keep U.S. trusts out of India. Hold Indian assets directly, dispose of them by an Indian will, and if a trust is wanted for Indian assets, create an Indian trust with Indian-resident trustees under Indian advice. U.S. trusts can and should hold U.S. assets; the two structures simply should not cross.

What Indian Planning Tools Should Be on the Table?

An Indian will. Under Section 63 of the Indian Succession Act, a will must be signed by the testator and attested by two witnesses who saw the testator sign or received the testator’s acknowledgment, each of whom signs in the testator’s presence. Registration of a will with the sub-registrar is optional under the Registration Act but is common and makes later challenge harder. The Indian will should cover Indian assets, be coordinated with the U.S. will so that neither revokes the other, and be kept where Indian family members can find it.

Probate. For decades, Section 213 of the Indian Succession Act required probate of wills made by Hindus and others within the original jurisdiction of the Bombay, Calcutta, and Madras High Courts, or affecting property there. The Repealing and Amending Act, 2025, which received presidential assent on December 20, 2025, omitted Section 213, so probate is no longer mandatory anywhere in India. It remains available and is often still the cleanest way to establish an executor’s authority with banks and registrars.

Succession and legal heir certificates. When there is no will, heirs establish their rights to movable property such as bank accounts and securities through a succession certificate issued by a district court, and their relationship to the deceased through a legal heir certificate issued by local revenue authorities. Both take time, and U.S.-based heirs typically act through an attorney holding an apostilled power of attorney.

Nominations, correctly understood. Indian bank accounts, mutual funds, insurance policies, and demat accounts carry nominations, and families often assume the nominee inherits. They do not. The Supreme Court of India confirmed in 2023 that a nominee holds the asset as a trustee for the legal heirs and that nomination does not create a third mode of succession alongside wills and intestacy. Nominations speed up release of funds; the will decides who keeps them.

Lifetime gifts. India does not tax gifts between close relatives, and lifetime transfers of Indian property to children in India can avoid the cross-border administration entirely, at the cost of the U.S. step-up in basis and with U.S. gift tax reporting.

Joint holding. Indian property and accounts are commonly held jointly with a survivorship arrangement. Whether the survivor takes outright or holds for the estate depends on the wording, and it should be checked.

What Happens to Assets Back in the United States?

U.S. real estate and accounts pass under U.S. procedures regardless of Indian law. Real estate requires probate or another transfer route in the state where it sits, retirement accounts pass by beneficiary designation, and New York and Connecticut impose their own estate taxes. Our overview of how probate works in New Jersey and New York explains what a family should expect. U.S. heirs receiving Indian property also need to remember U.S. reporting of foreign gifts and inheritances above the annual threshold and of foreign financial accounts.

Should You Have One Will or Two?

Two, in nearly every case. India is the clearest example in this series, because Indian law already splits the estate: Indian law governs Indian real estate no matter what any will says, and the law of your U.S. domicile governs the movables. A second will simply matches the documents to that division.

A single U.S. will can be used in India, but it arrives as a foreign document. Indian banks, registrars, and courts will want authenticated and apostilled copies, an affidavit explaining U.S. law, and in many cases a grant of probate or letters of administration from an Indian court before they act, even though probate is no longer mandatory. Each step adds months, and the family in India is dealing with an American executor who cannot easily appear. If the U.S. will pours everything into a revocable living trust, the Indian estate is being directed into a structure that Indian registrars will not record and Indian tax law treats unfavorably.

An Indian will avoids all of that. Executed under Section 63 with two attesting witnesses, registered with the sub-registrar for good measure, and kept in India where the family can find it, it covers Indian real estate and Indian movables, names an executor who lives in India, and leaves Indian assets outright to individuals rather than to any U.S. trust. The U.S. will covers everything in the United States. Each estate is administered locally by someone who can walk into the bank.

Three rules keep two wills from undoing each other:

• No general revocation clause. Each will revokes only prior wills dealing with the assets it covers and states that the other remains in force. Indian will templates commonly open by revoking “all previous wills and codicils.” That language must be limited to Indian assets or it cancels the U.S. will.
• Match the nominations. Indian bank, mutual fund, insurance, and demat nominations do not decide who keeps the asset, but a nominee who is not the intended heir under the will creates delay and often litigation. Update the nominations to match the Indian will.
• One residuary clause. Decide which will catches property in third countries and property acquired after signing, and make sure the two documents neither overlap nor leave a gap.

For a Muslim testator the one-third limit on bequests applies to the Indian estate whether there is one will or two, and the Indian will should be drafted with that limit and the consent of the heirs in mind.

Have both lawyers review both drafts before either is signed, and sign them in a sequence where the second expressly acknowledges the first.

How Do You Coordinate Planning on Both Sides?

An Indian advocate handles the Indian will, the religion-specific succession analysis, the probate or certificate proceedings, and title work; an Indian chartered accountant handles the capital gains computation, withholding, and repatriation certificates. A U.S. attorney handles the U.S. will and trusts, federal and state estate tax, beneficiary designations, and the coordination language. Bring a complete list of Indian assets showing how each is held and whether any is agricultural, the religion of the property owner, each heir’s citizenship and Overseas Citizen of India status, and every existing will, trust, and nomination.

Plan Well. Live Better.

Indian-American families are often reassured by India’s lack of an inheritance tax and then caught by the procedures, the exchange controls, and the poor fit between American trusts and Indian assets. At Milvidskiy Law Group, we handle the U.S. side of cross-border plans and coordinate directly with Indian counsel so the two halves work together. Learn more about our international estate planning services.

This article is for general informational purposes only and does not constitute legal or tax advice, and it does not address Indian law as an Indian practitioner would. Reading this article does not create an attorney-client relationship. Indian succession, tax, and exchange control rules depend on individual facts, including religion and citizenship status, and change frequently; the probate rule described here changed in December 2025 and the capital gains rules in July 2024. Figures were verified in September 2026 against Indian and U.S. sources and should be confirmed before relying on them.