Virendra (ITA) 27 July 2012

Poperty sale by nri legal heirs

Hello All,

PLEASE HELP ME!!!

I am looking here for help to understnad the scenario here and how this can be resovled:

The seller from whom I was buying the flat in Pune died just few days before sale deed could be executed. He has wife(Pune), 2 daughters(1 USA, currently in Pune/1 Mumbai) and a son (in US). The said property was in name of late father and the daughter residing in Mumbai. Son has given a General POA and indemnity certificate about overall properties/shares etc. in his mother's name. The deceased father had made a will where in he had mentioned that 1/3rd of share will go to his legal heirs. This will is not registered. And to proceed further with the distribution of the loan, bank actually requires probate on the WIll. To avoid delays in the same, Bank is asking for special POA and affidavit from the son in US. This special POA and affidavit only talks about said property in question. If he signs it and gets it notarized, the deal will go through, but he is not wiilling to sign it because, as per him, it will attract taxes. As his sisters and mother are in India, they can be presnt to complete the deal. SPOA and affidavit is needed from son as he is residing in US. Now, here is current scenario:

1. The Bank will get the DD in names of his mother and sister only, so no amount will be given to son, which will not attract taxes.

2. As I understand, if he will sign the SPOA and affidavit, as he has share in the property legally, it wiil still attract deemed gift taxes, which will be round 1% of his share.

So my question is, is my understanding correct about the gift taxes? Do the son in US need to pay any other taxes apart from deemed gift taxes?

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1 Replies

SRIPRAKASH BHATTACHARYA (RETIRED) 27 July 2012

Dear Sirs,

With reference to your questions my replies are as below:-

1. Please note that the POWER OF ATTORNEY (POA) to be given by the son who resides abroad must be registered at the point of issue or the country the son resides. Since the son is a NRI he can sworn an affidavit before the NOTARY of that country and the same has to be subsequently registered at the Indian Embassy/Highcommission as the case may be. This is keep you informed that as Indian Power of Attorney Act, the POA for selling any property must be registered (this is mandatory) otherwise it does not have any value and may take both the parties in problem. The Hon'ble Supreme Court too has given such jugement from time to time.

2. The Will has to be probabted. Unfortunately in our Indian courts it is long drwan process. But if you are lucky enough to identify and engage an advocate who is well conversant in such matters, smart, efficient and has integrity towars his/her cllient can get the job done within 3 - 6 months. There are certain procedures, which need to be adhered.

3. You must demand a copy of the POA and WILL both for your reference and records. Will may be either on the plain paper or duly registered. In both cases it has to be probated which si mnadatory. You need to read to the same line by line and try to find out if any hidden meanings are there in between the lines of the POA and WILL both. You must get yourself convinced. There is no necessity to fall in the prey of any such person who will do the job for and on your behalf of you and suck money from you continiously. You are to purchase the property and you must know the basic rules too.

4. I would suggest you to spend around Rs. 2000.00 +/- to purchase af ew books like indian Power of Attorney Act. Indian Notary Act and such other books which you find useful. Visit any good legal books seler, tell him your requirement, turn the pages and select the book. These books will not make a hole in your pocket but in turn will be of imense help to you.

3. In case it attarcts GIFT TAX, that is payable by the SELLER and not by you. So, why you should break your head ?

4. The NRI son need not pay any tax on this transaction if he a true NRI that means residing out of India continiously for more than 180 days.

Concludingly I have experienced that you will find a handful of people who are well conversant in such matters and have a through knowledge. If necessity demands, hire a good solitor firm who are beetr than so called knowledgeable people. Since, the property in question is in Mumbai and will not come cheap to you. Spend a few coins more to make it fullproof and remain free from tension and post problem. Property is a liquid gold and very sensitive matter.

Sriprakash Bhattacharya, KOLKATA

bhattacharyasriprakash@gmail.com