COURTKUTCHEHRY SPECIAL REPORT
India’s foreign assets and inheritance: Delhi High Court hearing in Sunjay Kapur’s case spotlights FEMA, wills, and repatriation rules
One-nation legal lens: How FEMA governs inheriting assets abroad
Key compliance: Probate, succession, and bringing money back to India
By Our Legal Reporter
New Delhi: December 10, 2025:
A recent Delhi High Court hearing involving Sunjay Kapur and Priya Kapur has drawn attention to how Indian law treats foreign assets in inheritance disputes. While the case’s celebrity profile captures headlines, the deeper issue is legal: what rules apply when Indian heirs inherit assets outside India, and how must those assets be reported, transferred, and repatriated? These questions bring together succession law, the Foreign Exchange Management Act (FEMA), and practical steps such as obtaining probate and complying with local foreign jurisdiction rules. The spotlight is on accuracy and compliance, especially when assets and heirs are spread across different countries and legal systems.
Core legal framework: FEMA and succession law interaction
India’s law separates two issues: who inherits (succession), and how assets or funds move across borders (foreign exchange). Succession is governed by personal laws (Hindu Succession Act, Indian Succession Act), wills, and local laws of the country where assets are located. Cross-border movement of value is governed by FEMA, 1999, and rules issued under it by the Reserve Bank of India (RBI). FEMA regulates holding foreign exchange, capital account transactions, and repatriation of foreign income, with penalties for violations. In inheritance, FEMA permits receipt of assets or money from abroad but requires compliance with repatriation and reporting norms. This dual framework is central to legally sound outcomes.
Under FEMA, inheritance and gifts are permitted capital account transactions subject to conditions. A resident Indian can inherit foreign assets or money from a person resident outside India; they may hold certain assets abroad under permitted categories and may be required to repatriate proceeds within prescribed timelines, especially where assets are liquidated. Practical compliance involves ensuring lawful acquisition, proper documentation, and channelling through authorized dealers. Legal commentary emphasizes mapping the factual situation—who the testator was (resident/non-resident), where the assets are, and who the heirs are (residents/NRIs)—because obligations vary across scenarios.
Key principles for foreign assets in inheritance
- Residency status matters:
FEMA distinguishes between resident Indians, NRIs/PIOs, and foreign nationals. A resident Indian inheriting foreign assets must comply with FEMA and RBI directions for holding or repatriating foreign currency or asset sale proceeds. NRIs inheriting Indian assets face the mirror obligations on bringing money out of India. - Lawful acquisition and documentation:
Inheritance is a permitted mode to receive foreign assets, but heirs must document lawful acquisition with the will, probate/letters of administration, succession certificate, and evidence from the foreign jurisdiction where assets are located. Banks and custodians typically require probate from the competent court or its re-sealing/recognition locally. - Holding, sale, and repatriation:
Heirs may hold assets abroad in certain cases, but sale proceeds are often expected to be repatriated to India within permitted timelines unless the law permits continued holding (e.g., securities received by way of inheritance). Where repatriation occurs, it must be through an authorized dealer bank, with proper form filings and tax compliance. - Current vs capital account transactions:
FEMA distinguishes current account transactions (like maintenance remittances) and capital account transactions (like acquisition/transfer of assets). Inheritance generally falls under capital account rules; authorization, reporting, and conditions apply accordingly. - Multiple scenarios, different rules:
Expert analyses outline specific permutations: non-resident testator leaving foreign assets to resident heirs; resident testator leaving Indian or foreign assets; and cross-border family arrangements involving mixed residency. Each scenario has different outcomes on whether assets can be held abroad, must be liquidated, and how proceeds are repatriated.
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Compliance steps for heirs with foreign assets
- Obtain probate or equivalent recognition:
Probate/letters of administration are often required to evidence the will and heirship. If the will is probated in one country, it may need recognition in the country where the foreign asset sits. Indian courts may issue probate; some foreign jurisdictions may demand local proceedings. - Engage authorized dealer banks:
For repatriation and reporting, heirs should work with authorized dealers under FEMA. Banks handle forms, declarations, and ensure transactions meet RBI rules. - Assess holding vs repatriating:
Where FEMA allows continued holding (for example, certain inherited foreign securities), heirs should document the permission. If repatriation is required, plan currency conversion, local taxes, and Indian tax obligations. - Tax in both jurisdictions:
Inheritance tax may apply abroad (though India does not levy estate duty currently). Local capital gains, withholding taxes, and compliance must be settled before remitting funds. In India, receipt of inheritance is not taxable as income, but subsequent income (rent, dividends) and capital gains on sale are taxable. Coordination with double tax avoidance agreements may be necessary.
Common pitfalls and how to avoid them
- Ignoring FEMA approvals or reporting:
Treating inheritance purely as a private matter can lead to FEMA breaches if assets are held or sold abroad without authorized channels or disallowed structures. Early consultation with the authorized dealer and documentation protects against penalties. - Unclear residency and mixed family situations:
Families with members across countries often misapply rules. Clear classification of the testator and each heir’s residency under FEMA (not just tax residency) is crucial for permitted holdings and remittances. - Assuming universal probate recognition:
A probate granted in one jurisdiction may not automatically work elsewhere. Each foreign asset location may require local procedures; overlooking this can block transfers. - Delayed repatriation or informal transfers:
Selling assets abroad and transferring funds informally can violate FEMA. Use authorized channels and keep audit-ready records of lawful acquisition, sale, taxes paid, and remittance.
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Broader legal context and ongoing developments
Legal literature and expert guidance repeatedly stress that FEMA is not a succession law; it is a movement-of-money law that sits alongside succession rules. That means “who gets what” is governed by wills and succession statutes, but “how value crosses borders” is governed by FEMA. Detailed expert notes catalogue different inheritance situations and the relevant FEMA permissions, including when resident heirs can hold foreign assets and when they must bring money back. These resources also flag the need for professional advice in complex, cross-border estates.
The statute itself empowers RBI to regulate capital account transactions, repatriation of foreign exchange, and penalties for contravention. Appeals mechanisms exist under FEMA for adjudication and penalties, underscoring that compliance is a formal, enforceable requirement. For high-profile disputes in Indian courts, these FEMA elements often become decisive alongside succession and company law issues, especially where foreign assets intersect with Indian corporate rights or family settlements.
Direct answer
The laws that govern foreign assets in the context of inheritance are primarily FEMA, 1999 (and RBI rules under it) for cross-border holding, sale, and repatriation; and succession/will laws (including the Indian Succession Act and applicable personal laws) for determining heirs and transfer of title. Probate and recognition of wills in the foreign jurisdiction are practical necessities; authorized dealer banks manage compliant remittances; and documentation of lawful acquisition, local tax clearance, and Indian tax treatment is essential. Treat succession as the “who” question, and FEMA as the “how” question.
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