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Inheriting Indian securities while living abroad can create a lot of confusion. There are a lot of restrictions on buying assets in India for NRIs; however, inheritance of assets is treated differently. There are no restrictions on movable or immovable assets an NRI can inherit, and no approval from the RBI is needed. This is the good news.
The bad news comes in the form of consequences such as showing your legal right to the assets, making the transfer to your name, figuring out your tax bill, and moving the money out of India. This guide is intended to help NRIs with the process for inheritance of Indian stocks, mutual funds, and bonds, while covering the new rules for 2026.
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NRI Inheritance Rules in India: What’s Allowed Under FEMA
FEMA (the Foreign Exchange Management Act, 1999) provides a framework within which NRIs can hold, acquire, transfer, and repatriate various assets in India, including real estate, shares, and deposits. It is the basis of the Reserve Bank of India’s (RBI) regulation of cross-border flows of money and explains why NRIs have restrictions on the purchase of certain Indian assets, unlike resident Indians. Inheritance, however, is treated as a special case under FEMA, which is what makes this whole process more straightforward than you might expect.
FEMA is clear about the difference between purchase and inheritance. As an NRI, you can inherit the following:
- Listed and unlisted shares, demat holdings, and mutual fund units
- Government and corporate bonds, including Sovereign Gold Bonds and RBI Floating Rate Savings Bonds
- Bank deposits, fixed deposits, and insurance payouts
- Residential and commercial property
- Agricultural land, plantation property, and farmhouses: asset classes NRIs cannot legally purchase, but can legally inherit
Agricultural land is the only exemption with respect to inherited assets: You can use and hold the land; however, the land can only be sold to an Indian resident citizen and not to another NRI or OCI. A similar quirk applies to Sovereign Gold Bonds: NRIs can’t buy fresh SGBs, but if you inherit them, you’re allowed to hold them until maturity.
The Transmission Process: Getting Assets Into Your Name
“Transmission” describes the legal movement of securities from the account of a deceased holder to the account of the heir. Much of the variation in process is dependent on whether or not a nominee was registered.
- If a nominee exists: The nominee can quickly obtain securities by submitting the death certificate, proof of identity, and the transmission request to the depository participant (in case of demat shares) or to the AMC/Registrar and Transfer Agent (RTA) (in case of mutual funds), respectively.
- If no nominee exists or in case of a will dispute: One generally has to obtain a succession certificate from a district court in India to permit heirs to obtain movable property like bank shares, deposits, and mutual funds. This generally takes 6 to 18 months of court proceedings, but this is the most required document by financial institutions.
- As an NRI heir, you will need to open a non-repatriable (“Non-PINS”) NRO demat account [1]. This account type is required for the transmission of shares and for the issuance of mutual fund units to the heir, as you are a non-resident of India and the assets are non- repatriable by default. An NRO savings account will not be enough.
- Before a transmission request is made, ensure that KYC and FATCA/CRS details are updated with the broker or registrar.
- The treatment of bonds depends on how they are held. Corporate bonds and G-secs held in the demat account are in the same boat as shares. Sovereign Gold Bonds and RBI Retail Direct investments, or Certificates of Holding, are not routed through the stockbroker. They use a different claim process. After bonds are transmitted, the nominee, or if there is no nomination, the legal heir or the holder of the succession certificate, may submit a claim at the bank, post office, or depository where the bonds are held. After the claim is processed, the bonds are reissued in the name of the nominee through E-Kuber, which will take longer than a demat transmission.
You should avoid being hasty and selling the assets as soon as they are transmitted to you. In the words of an NRI-specific advisory, there is no tax on inherited assets at the time of receipt, so take time to think and plan your strategy regarding the assets you now hold.
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NRI Inheritance Checklist: Documents You’ll Need
| Document | Required For |
| Death certificate (original + copies) | All transmissions |
| Succession certificate / probated will / legal heir certificate | No registered nominee |
| PAN card of the heir | Mandatory for any securities transaction |
| Non-PINS NRO demat account + NRO mutual fund folio | Receiving transmitted shares/units |
| Indemnity bond/affidavit | Some depositories and AMCs |
| KYC documents (passport, OCI/visa, overseas address proof) | NRI account and folio update |
| Certificate of Holding + RBI claim form | Bonds held via RBI Retail Direct or as physical RBI bond certificates (SGBs, G-secs) |
SEBI’s New Nomination Rule 2026: What NRIs Must Know
SEBI has been adjusting nomination requirements for years, and the latest changes are significant for inheritance planning. Starting September 1, 2026 [2], when opening new single-holder demat accounts or mutual fund folios, a nomination will be required, or the customer will need to sign a formal waiver to opt out. Currently, nomination papers will require only the name and relationship to the nominee.
The PAN, Aadhaar, and contact details will be optional. If you are a parent-aged NRI in India managing the property of your parents, it is good to know that this is a great opportunity to get your parents’ nominations updated, as it will provide the greatest benefit for securing a smooth inheritance process. SEBI is also looking to provide relief for nominees [3] in other situations. Nominees in other situations will currently be taxed as if they sold the securities.
There is one very important exception. SEBI’s new regulations will cover only demat accounts and mutual fund folios. Bonds that are held through the RBI Retail Direct Scheme or as physical Certificates of Holding will be covered by the Government Securities Act, 2006 and the Reserve Bank of India’s nomination framework.
SEBI’s new regulations for September 2026 will not cover these Bonds. If your family holds SGBs or Government Securities directly with the Reserve Bank of India, check the nomination of that account separately, as updating the Demat nomination will not cover it.
Tax on Inherited Securities: What You’ll Actually Owe
Inheritance itself isn’t taxed in India. Tax kicks in only when you sell the inherited stock, mutual fund unit, or bond, and your cost basis carries over from the original owner’s purchase price and holding period.
- Equity shares/equity mutual funds: Post 23 July 2024, LTCG (holding period over 12 months) will be taxed at 12.5% for gains over ₹1.25 lakh, and there will be no indexation. STCG (less than 12 months) will be taxed at a flat 20% as per Section 111A.
- Debt mutual funds: Post April 2023, they will be taxed at the applicable income tax slab irrespective of the holding period.
- Bonds: Listed bonds will attract LTCG of 12.5% (no indexation) if sold after 12 months. Gains will be taxed as per the investor’s Income Tax slab if sold before 12 months. Unlisted bonds will attract the same LTCG of 12.5% after 24 months of holding, and the gains will be taxed in the investor’s Income Tax slab if sold before 24 months. SGBs will be tax-free if redeemed at maturity. However, capital gains tax will be applicable if SGBs are sold on the exchange before maturity.
- TDS is the main NRI-related problem. Unlike resident investors, NRIs will have TDS deducted at source by the AMC or broker on every sale or redemption. NRIs will receive only the net amount.
- Excess TDS can be claimed back by the NRI via ITR, and an application can be placed for a lower or nil TDS certificate as per Section 197.
NRI Fund Repatriation Rules: NRO Account, 15CA/15CB Explained
After selling and paying the tax, the movement of funds abroad from your NRO account follows the general guidelines of the NRO account with one bond-specific exception.
- NRIs can remit a maximum of USD 1 million per financial year from the NRO account without the need for RBI approval.
- For banks to facilitate the outward remittance, Forms 15CA and 15CB need to be submitted, along with a self-declaration and a certificate, respectively.
- Approval to remit amounts greater than USD 1 million is generally sought for cases of medical emergencies, etc.
- With respect to inherited Sovereign Gold Bonds (SGB), while NRIs can hold inherited SGBs till maturity, the interest and maturity proceeds of SGBs are not repatriable. Keeping this in mind, if your principal inheritance is in SGBs, you would need to plan to manage the funds, as the proceeds will remain in your NRO account and will have to be used in India.
Wrapping Up: Making NRI Inheritance Transmission Smoother
For the most part, the friction related to Indian stocks, mutual funds, and bonds boils down to paperwork that could be sorted ahead of time. Having an effective nominee, an active NRO demat account, and KYC details would make the process much easier and faster. If you possess these assets on behalf of overseas family members, don’t wait until September 2026 to nominate. Do it now. If you have inherited these assets, do not sell immediately. Take time to analyse your inheritance, learn and understand the applicable tax laws and the laws on repatriation for each asset to be able to make informed decisions that would best help you achieve your financial goals.
Frequently Asked Questions
Yes, NRIs can inherit stocks, mutual funds, bonds, and other financial assets in India under the Indian succession laws and the applicable FEMA regulations.
As a rule, no. The inheritance of financial assets in India by NRIs is generally permitted under FEMA without the requirement of prior approval of the RBI.
In the case of transmission, the original holder of the securities has passed away, and the ownership is transferred to the legal heir or the nominee. In the case of transfer, the movement of securities is a voluntary act between the current holders.
The required documents typically include the death certificate, KYC documents, transmission request form, and, depending on the circumstances, a nominee declaration, succession certificate, probate, or legal heir documents.
Yes. After the securities are transmitted to the NRI’s account, they can generally be sold in accordance with applicable FEMA, SEBI, and tax regulations.
In India, generally, inheriting anything is not subject to tax. However, once the inherited investments are sold, capital gains tax might apply.
Sources
- https://www.icici.bank.in/Personal-Banking/demat/guidance-pro-tran-shares
- https://www.businesstoday.in/markets/story/new-sebi-rules-single-demat-account-holders-must-nominate-or-formally-opt-out-from-sept-534051-2026-05-29
- https://www.business-standard.com/finance/personal-finance/tax-relief-on-inherited-shares-sebi-floats-proposal-for-smoother-transfer-125081901160_1.html
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