Home >Money >Q&a >NRIs can acquire farmland via inheritance

I’m a US citizen residing in India. For the financial year 2020-21 (the assessment year 2021-22), I will be filing my taxes as a resident and ordinarily resident (ROR). As a result, my US income will be taxable. In April 2020 and January 2021, I received monetary relief payment from the US government as a relief measure to all US citizens due to the coronavirus pandemic. These payments came as income tax refunds through the IRS (Internal Revenue Service), which is equivalent to the Central Board of Direct Taxes (CBDT) in India. These payments will not be considered as income of taxpayers in the US by the IRS. My question is how will this payment be treated by the CBDT? If the CBDT considers this as income, then I will show this as income while filing my return for the assessment year 2021-22. But if the CBDT does not consider it as income like the US government, then I will not add this with my income for the assessment year 2021-22. Would these relief payments qualify as exempt income under Section 10(10BC) of the I-T Act?

—Name withheld on request

As you qualify as a resident and ordinarily resident (ROR) in India for the financial year 2020-21, you will be taxed on the worldwide income in India, and you are required to report all foreign assets in the India income tax return. Also, the income earned from such foreign assets during the relevant year along with the nature of income and head of income under which such income has been offered to tax in the India income tax return needs to be reported in relation to each foreign asset.

Nothing is prescribed in the India income tax law with respect to taxability of overseas monetary relief, but since the receipt is from the government as a welfare subsidy on account of the covid-19 pandemic, it may be arguably claimed as not liable to tax as per paragraph 5.2 of the CBDT circular No. 19 dated 27 November 2015. Nevertheless, it would be advisable to report it as foreign income claimed as exempt from tax in your India income tax return.

My brother has migrated to the US and is a citizen there. We are three brothers. My father owns agricultural land and wants to divide it among the three of us. Can my brother, who is a US citizen, inherit agricultural land?

—Name withheld on request

Under the exchange control law, non-resident Indians or foreign passport holders are prohibited from acquiring agricultural land in India. However, as an exception, a non-resident Indian (a person resident outside India who is a citizen of India) or an Overseas Citizen of India (OCI) cardholder can acquire any immovable property in India (including agricultural land) by way of inheritance from a person resident in India.

Assuming your brother is an OCI cardholder, and your father is a person resident in India, your brother may inherit agricultural land from your father. However, your brother will be able to transfer such agricultural land only to a person resident in India.

Sonu Iyer is tax partner and people advisory services leader, EY India.

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