What happens if I transfer my inheritance money abroad?
When you transfer your inheritance from India, you must pay inheritance tax and other taxes in the country you live in. Different countries have various laws, so it is important to check them out because you might end up paying for expensive fines or even a criminal liability.
India also has rules for transferring Indian income from the country (this means repatriation of funds).
Repatriation of Indian funds
If you are a non-resident, you must deposit any income that you make in India (including inheritance money) in a non-resident Ordinary account.
This type of account does not allow funds to be freely transferred from the country. You have to ask your bank to do this for you. You will also need the following documents:
- Two copies of the certificate of information, also known as Form 15CB, have been completed and signed by a chartered accountant.
- Form 15CA (you need information from Form 15CB to complete this);
- Form A2 (Your bank should give you a copy of this); and
- Application for foreign trade (your bank should also give you a copy of it).
You can transfer up to US$1 million per fiscal year after taxes. The financial year lasts from April to March.
Transfer of inheritance money to the UK
The United Kingdom is currently the only country with which India has an agreement (contract) specifically on inheritance tax.
According to this contract, whether you must pay the UK inheritance tax depends on where the deceased was domiciled at the event of death. In the simplest, your domicile is the country that you consider as your permanent home.
You only have to pay the UK inheritance tax if the deceased was domiciled in the UK at the time of death. This is currently set at 40%, but there are several exemptions and deductions you can make.
Transfer of inheritance money to the USA
You only have to pay the US inheritance tax if the deceased was a US citizen, citizen or green card holder. However, you must still report your inheritance to the IRS by submitting Form 3520 along with your annual tax return.
An income from your inheritance will be taxed in the US according to US regulations. This adds dividends, interest, and capital gains. You can claim foreign tax credit for all amounts you have already paid in India.
Transferring inheritance money to Australia
Australia has no inheritance tax. However, you still have to report your inheritance to the tax authorities. In Australia, you need to explain all foreign assets more than AUD$ 50,000 to your tax return every year. In addition, as a resident, you are taxed on your worldwide income. Any income your Indian inheritance generates will count towards your Australian income tax liability.