Can two collectors in different countries co-own an Indian note?

FEMA — the cross-border dimension

The foreign co-owner's purchase of an interest in the note is an inward remittance to India — foreign exchange flowing into India to acquire an Indian asset. This is a permissible capital account transaction under FEMA (purchasing movable property in India). The foreign co-owner should remit their contribution through normal banking channels to the Indian co-owner's bank account, maintaining a documentary record of the purpose ('purchase of co-ownership interest in numismatic item — [description]').

When the note is eventually sold, the foreign co-owner's share of the proceeds is Indian-source income (capital gain from sale of Indian movable property). This income is taxable in India. The Indian buyer must deduct TDS under IT Act Section 195 on the capital gain portion before paying the foreign co-owner. The foreign co-owner can repatriate their post-tax proceeds through the NRO route (if they are a Non-Resident Indian) or through normal banking channels with tax clearance documentation.

Physical custody — the practical consideration

A note co-owned between an Indian and a foreign collector must have a defined physical custody arrangement. The note cannot be shared across countries simultaneously — it has to be somewhere. The co-ownership agreement should specify: which country the note is stored in; who is the designated custodian; the conditions for physical inspection by the foreign co-owner (who may want to view it during visits to India); and what happens if the foreign co-owner wants to take the note to their country for an exhibition (which requires ASI export permit if the note is more than 100 years old).

The written co-ownership agreement — essential for cross-border co-ownership

A written co-ownership agreement is even more essential for cross-border co-ownership than for domestic co-ownership. The agreement should specify: the governing law (Indian law for a note physically located in India); the dispute resolution mechanism (Indian court or international arbitration); FEMA compliance obligations; the physical custody arrangement; the ASI export permit obligation before any international movement; the tax obligations of each party; and the buy-out and dissolution provisions. Both parties should engage an advocate familiar with FEMA and international private law before entering the arrangement.

Laws & authorities referenced in this chapter

FEMA 1999 — §6(3)(a) (foreign national/NRI: can hold movable property in India; inward remittance for purchase is permissible)

Income Tax Act 1961 — §195 (TDS on payment to non-resident: deduct on capital gain portion when co-owner receives share of sale proceeds)

Antiquities and Art Treasures Act 1972 — §3 (ASI export permit required before note moves internationally even for co-owner's access)

Arbitration and Conciliation Act 1996 — international arbitration: appropriate dispute resolution for cross-border co-ownership disputes