NRI Family Property Settlement: Key Issues & Solutions

Introduction

If you’re an NRI or have loved ones living abroad, chances are you’ve encountered confusion when it comes to family property settlements in India. I’ve been getting a ton of questions lately from friends and clients who are Non-Resident Indians (NRIs). The common thread? They’re trying to help their aging parents in India settle family property — but the legal issues can get quite complex.

Whether it’s dividing agricultural land, redistributing family assets, or figuring out the best way to transfer money abroad, these are real challenges. Without proper legal knowledge, it’s easy to make mistakes that lead to delays, tax issues, or even legal complications.

So in today’s article, let’s walk through some key issues and practical solutions when it comes to family settlements for NRIs. We’ll cover four real-life cases and break down how to handle them legally and efficiently.

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Case 1: Can an NRI Receive Agricultural Land in a Family Settlement?

Let’s start with one of the most common questions:

Can an NRI receive agricultural land as part of a family settlement in India?

Here’s the straight answer:

Under FEMA (Foreign Exchange Management Act), an NRI cannot purchase or acquire agricultural land in India — unless it’s through inheritance.

 

So, what’s the workaround?

If your family is dividing assets and agricultural land is involved, you cannot receive legal ownership of the land directly. However, you can be named a beneficial owner.

What does that mean?

As a beneficial owner, you can:

• Receive rent from the land,

• Engage in agricultural activities, and

• Enjoy all benefits — without holding the legal title.

How to structure it:

• Your parents (or the current owners) retain legal ownership during their lifetime.

• In their will, they specify that the land should pass to you as inheritance.
  Once they are no longer around, you can inherit the property — which is legal under FEMA.

This approach aligns with both FEMA rules and family intentions, offering a smooth and compliant solution.

Case 2: Redistributing Assets Among Siblings (One NRI, One Resident)

Now, let’s say you already own a piece of agricultural land in India, which you bought while living there. Now you’re an NRI.

Your family decides to redistribute assets because some plots are more valuable than others. For example, maybe your sibling received a less valuable plot, and you want to adjust things fairly.

Can this be done legally?

Yes, absolutely. As long as:

• You acquired the land while you were still a resident Indian, and

• The redistribution doesn’t involve any new acquisition after becoming an NRI,

…it’s completely legal. FEMA has no objections because you’re not acquiring new property — just reorganizing existing family assets.

This kind of fair adjustment is common in family settlements. With proper documentation, it helps avoid future disputes.

Case 3: Agricultural Land in Mother’s Name — Can the NRI Son Take the Sale Proceeds Abroad?

Here’s a scenario I came across:

A family had agricultural land registered in the mother’s name. The son, now an NRI, wants to sell it and use the money abroad.

Is this possible?

Yes, it is. Since the mother is the legal owner, she can:

• Sell the property,

• Pay the applicable capital gains tax, and

• Remit the money to her NRI son under the Liberalized Remittance Scheme (LRS).

One catch: 20% TDS (Tax Deducted at Source)

This TDS applies to the remittance. But here’s the good news — this is not a final tax. The mother can file an income tax return and claim a refund if too much tax was deducted.

While the process involves paperwork, it is legal and ensures that you’re not overpaying in the long run.

Case 4: Should an NRI Sell Shares Directly or Gift Them to Parents to Sell?

This question comes up a lot and can be tricky if you’re not clear on the tax rules.

Let’s say you’re an NRI with shares in India. Should you:

• Sell them yourself, or

• Gift them to your parents, let them sell, and then send you the money?

The best option?

Sell the shares in your own name. Here’s why:

• You’ll pay 25% TDS as an NRI. But again, it’s not final — you can claim a refund if your actual tax liability is lower (e.g., 12.5% for long-term capital gains).

• Since the money is legally yours, there’s no extra TDS when you transfer it abroad.

Why gifting can cause issues:

• Your parents would pay capital gains tax, and then an additional 20% TDS to remit the money.

• Plus, the Income Tax Department might flag the transaction as suspicious because you’re the ultimate financial beneficiary.

Sell the shares yourself, pay the correct tax, and file a return if needed to claim a refund.

Conclusion

Let’s recap the key takeaways:

• NRIs cannot acquire agricultural land in India unless it’s inherited.

• You can enjoy beneficial rights through proper legal structuring.

• Redistribution of family assets is legal if no new acquisition happens after becoming an NRI.

• Parents can sell property and send funds abroad — just ensure TDS and tax filings are done.

• If you’re an NRI with shares in India, sell them yourself to avoid unnecessary tax and legal issues.

By staying compliant with FEMA and Indian tax laws, you can ensure that your family settlement is smooth, legal, and stress-free for everyone involved.