Need Expert Advice?Our Gurus Can Help

Indian Deceased Left Shares in the US: Questions from Beneficiaries

Samraat Jadhav |2228 Answers |Ask -Follow

Stock Market Expert - Answered on Jan 13, 2025

Samraat Jadhav is the founder of Prosperity Wealth Adviser.
He is a SEBI-registered investment and research analyst and has over 18 years of experience in managing high-end portfolios.
A management graduate from XLRI-Jamshedpur, Jadhav specialises in portfolio management, investment banking, financial planning, derivatives, equities and capital markets.... more

Asked by Anonymous - Jan 10, 2025Hindi

A is an Indian who worked in an Indian company ( a US subsidiary ) and received ESOPs and RSUs as part of his compensation. He expired in 2021 due to covid and left shares in USA which are listed in USA. A succession certificate in favour of B ( A's wife) and C ( A's son ) was submitted to the brokerage account in which 50% shares are to be given to each. Since C is a minor, his 50% share is to be kept till he attains the age of majority. The queries are : 1. After payment of Estate Duty in USA, when the brokerage is allowed to release the shares, where will the shares of C have to be kept? Can they be sold and the money parked in a bank account in India ? 2. When a part of the shares are sold by the brokerage for payment of Estate Duty, will the sale price attract capital gains tax ? 3. What will be the cost of acquisition for B & C? Will it be the price at which the shares were originally acquired or the price on the date of death of the holder ( this is the rate which has been considered for calculation of the Estate Duty ).

Ans: Let's address your queries one by one:
1. After payment of Estate Duty in the USA, when the brokerage is allowed to release the shares, where will the shares of C have to be kept?
o Once the Estate Duty is paid, the brokerage can release the shares. Since C is a minor, his 50% share should be kept in a custodial account until he reaches the age of majority. The shares cannot be sold and the money parked in a bank account in India without following proper legal procedures and tax regulations.
2. When a part of the shares are sold by the brokerage for payment of Estate Duty, will the sale price attract capital gains tax?
o Yes, the sale price will attract capital gains tax. The capital gains tax will be calculated based on the difference between the sale price and the fair market value of the shares at the date of death.
3. What will be the cost of acquisition for B & C? Will it be the price at which the shares were originally acquired or the price on the date of death of the holder (this is the rate which has been considered for calculation of the Estate Duty)?
o The cost of acquisition for B and C will be the fair market value of the shares on the date of death of the holder. This value is used for calculating the Estate Duty.
I hope this helps clarify things. If you have any more questions or need further assistance, feel free to ask.

Asked on - Jan 13, 2025 | Answered on Jan 13, 2025

Thanks a lot for the clear answers to the queries. However, from custodial account, do you mean a brokerage account in USA in the name of B only ( but a seperate account as B already has a brokerage account with the same brokerage where A had the account ). If yes, then please let me know how B can have two accounts with the same brokerage ? Also, can B sell the shares on behalf of C and transfer the proceeds to an Indian bank in which an account can be opened in name of C under guardianship of B? Or can B keep the shares in her already existing account and does not sell the number of shares entitled to C until C attains the age of majority ? Would be highly thankful for more info on this aspect.

Ans: Multiple Brokerage Accounts: Yes, B can have two separate brokerage accounts with the same brokerage. This is often done for different purposes, such as managing personal investments separately from those of the minor (C). To open a second account, B would need to follow the brokerage's account opening procedures, which typically include providing identification, completing a new account application, and fulfilling any necessary Know Your Customer (KYC) requirements.
Selling Shares on Behalf of C: As C's legal guardian, B can sell the shares entitled to C and transfer the proceeds to an Indian bank account. B would need to ensure that all legal and tax requirements are met for both the sale and the transfer of funds. The proceeds can be transferred to an account in C's name, under B's guardianship, in India.
Keeping Shares in B's Account: B can also choose to keep the shares in her existing account until C reaches the age of majority. However, B would need to ensure that the shares are clearly designated as C's property and that all transactions are properly documented.
Transferring Funds to India: B can transfer the sale proceeds to India using various methods, such as bank transfers, online money transfer services, or wire transfers. It's important to choose a reliable service that offers competitive exchange rates and low fees.

Asked on - Jan 13, 2025 | Answered on Jan 14, 2025

Thanks a lot Mr Samraat for the crisp & clear answers to the queries.

Ans: Thanks

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.

Money1Reply

You may like to see similar questions and answers below

Anil Rego |388 Answers |Ask -Follow

Financial Planner - Answered on Aug 25, 2022

Question by Biswatosh - Aug 25, 2022Hindi

With due respect and humble submission I like to take your kind suggestions on my query as under: 1. That Sir, through succession we the two surviving brothers likely to get bank deposits and marketable securities of equity like shares and MF of our deceased unmarried younger brother who died recently intestate. Under the above facts and circumstances please enlighten me whether we will have to pay income tax on the money received through succession and how we will show it in income tax return? Secondly, please inform how we will receive the money from the bank authority or from the depository participant so as to avoid future complications on income tax return. Thanking you.

Ans: There is no inheritance tax in India on the assets that one inherits. However, when a person dies intestate, the income shall be taxable in the hands of legal representatives (in this case you and your brother) after the date of distribution of the income.

Since the person has passed away without a will, all legal heirs (you and your brother) are entitled to get an equal share of his shares and mutual fund units. For this you will need to submit few documents.

It is a good idea for you to approach the respective financial institution for their process of transmission and you can follow it accordingly.

Money