Do NRIs Have to Pay Tax on Inherited Property in India?
Types of Property NRIs Can Inherit in India
NRIs are allowed to inherit different types of property in India. This is important because FEMA rules restrict NRIs from directly purchasing certain properties, but inheritance is treated differently.
| Type of property | Can NRI inherit? | Important note |
| Residential property | Yes | NRIs can inherit houses, flats, apartments, villas, and residential plots in India. |
| Commercial property | Yes | NRIs can inherit shops, offices, commercial units, and other business-related immovable property. |
| Agricultural land | Yes, through inheritance | NRIs can inherit agricultural land, but sale or transfer is restricted. |
| Farmhouse | Yes, through inheritance | NRIs can inherit a farmhouse, but direct purchase is generally restricted. |
| Plantation property | Yes, through inheritance | NRIs can inherit plantation property, but direct purchase is restricted. |
| Movable assets | Yes | Includes cash, jewellery, vehicles, shares, bank deposits, mutual funds, and other investments. |
RBI’s immovable property guidance for NRIs and OCIs states that NRIs and OCIs may inherit immovable property in India. It also states that agricultural land can be sold only to a resident Indian citizen. Residential and commercial property can be sold to a resident Indian, NRI, or OCI, subject to applicable rules.
Tax Liability for Inherited Property as an NRI
The tax treatment depends on what happens after the NRI receives the property. If the NRI simply inherits the property and keeps it, there is no inheritance tax payable in India. Tax liability begins when the property earns income, is sold, or the proceeds are remitted abroad.
No tax is payable at the time of inheritance
An NRI does not have to pay tax just because they receive property through inheritance, will, or succession. The inherited property is not treated as taxable income at the time of receipt.
Rental income from inherited property is taxable
If the inherited property is rented out, the rental income is taxable in India. The NRI may need to report this income in their Indian income tax return after claiming eligible deductions.
Capital gains tax applies when inherited property is sold
If an NRI sells inherited property, capital gains tax may apply. The gain is calculated using the original owner’s cost of acquisition and holding period. The inherited property is not treated as having zero cost.
FEMA and banking compliance apply for repatriation
If the NRI wants to transfer inherited funds or sale proceeds abroad, the amount is usually routed through an NRO account. RBI’s Remittance of Assets FAQ states that NRIs and PIOs may remit up to USD 1 million per financial year from NRO account balances, sale proceeds of assets, or assets acquired by inheritance, subject to documentation and tax compliance.
Can an NRI Sell Inherited Property in India and What Tax Applies?
Yes, an NRI can sell inherited property in India. The rules depend on the type of property and the buyer.
Residential and commercial property can be sold to a resident Indian, another NRI, or an OCI, subject to FEMA and property law compliance. Agricultural land, plantation property, and farmhouses have stricter rules. These can be sold only to a person resident in India who is an Indian citizen, as per RBI’s immovable property guidance.
Before selling, the NRI should check title documents, mutation records, will or succession documents, legal heir papers, TDS requirements, capital gains tax, and repatriation documents.
| Tax point | What it means for NRI |
| Capital gains tax | Tax applies if the inherited property is sold for a profit. |
| Cost of acquisition | The original owner’s purchase cost is considered, not zero. |
| Holding period | The previous owner’s holding period is included while deciding whether the gain is short-term or long-term. |
| Long-term capital gains | Long-term gains on property are generally taxed at 12.5% without indexation after the July 23, 2024 changes. The Income Tax Department states that resident individuals and HUFs may choose 20% with indexation for land or building bought before July 23, 2024. NRIs should confirm eligibility before assuming this option applies to them. |
| Short-term capital gains | If the property is short-term, the gain is taxed according to applicable income tax rules. |
| TDS under Section 195 | The buyer must deduct TDS before paying an NRI seller. Section 195 does not provide a basic threshold exemption like resident property sale TDS rules. |
| Lower TDS certificate | The NRI seller can apply for a lower or nil TDS certificate under Section 197 before the sale. This helps avoid excess TDS deduction. |
| ITR filing | The NRI should file an Indian income tax return to report capital gains, claim exemptions, or claim refund of excess TDS. |
| Exemptions | Sections such as 54 or 54EC may help reduce capital gains tax if reinvestment conditions are satisfied. |
| Repatriation | Sale proceeds should usually be routed through an NRO account before remittance abroad. |
Why Form 13 and Lower TDS Certificate Matter for NRI Sellers
TDS is one of the biggest practical issues for NRIs selling inherited property in India. The buyer deducts tax under Section 195, often on the sale consideration or as advised for the transaction. This can block a large amount of money if the actual capital gains tax is lower.
An NRI seller can apply for a lower or nil TDS certificate under Section 197 before the sale. The application is made in Form 13. If the Assessing Officer issues the certificate, the buyer can deduct TDS at the lower rate mentioned in the certificate. The Income Tax Department explains that a lower deduction certificate allows the payer to deduct tax at the rate specified in the certificate.
This should be done before the sale payment is made. Once excess TDS is deducted, the NRI may need to file an income tax return and wait for a refund.
Budget 2026 PAN-Based Challan Update
Budget 2026 has announced or proposed a PAN-based challan system for resident buyers purchasing property from NRIs. It is expected to apply from October 1, 2026. Until it becomes effective, buyers should continue following the existing TDS process.
This change does not remove Section 195 TDS. It only simplifies the payment process by reducing the need for a resident buyer to obtain TAN for a one-time NRI property transaction, once the provision takes effect.
DTAA Impact for NRIs
NRIs should check Double Taxation Avoidance Agreement rules when they live in countries such as the US, UK, Canada, UAE, Australia, or Singapore. India may tax capital gains on Indian property because the property is located in India. The country of residence may also require disclosure or tax reporting.
A DTAA may help avoid double taxation through foreign tax credit or treaty relief, depending on the country and the type of income. DTAA relief is not automatic. The NRI should keep Indian tax payment proof, capital gains computation, TDS certificate, and foreign tax filing records.
Repatriation of Inherited Property Sale Proceeds
NRIs can repatriate eligible inherited funds or sale proceeds from India through their NRO account. RBI permits remittance up to USD 1 million per financial year from NRO account balances, sale proceeds of assets, or inherited assets, subject to tax compliance and bank documentation.
Banks may ask for:
- Sale deed
- Proof of inheritance
- Will, legal heir certificate, succession certificate, or other succession documents
- PAN of the NRI seller
- NRO account details
- Capital gains computation
- TDS certificate
- Form 15CA and Form 15CB, where applicable
- Tax paid proof or ITR acknowledgement
- FEMA declaration and bank forms
The practical rule is simple. The NRI should first establish ownership, complete tax compliance, receive or move the money into the NRO account, and then apply for outward remittance through the bank.
Documents NRIs Need for Inherited Property Tax and Transfer
Documentation is important even when inheritance itself is not taxable. Documents are needed for title transfer, sale, tax calculation, TDS compliance, and repatriation.
Death certificate of original owner
This proves the death of the person from whom the property was inherited. It is required for legal, mutation, and transfer processes.
Will or succession documents
If the property was inherited through a will, the will becomes an important document. If there is no will, succession documents may be required.
Legal heir certificate or succession certificate
These documents may be needed to establish rightful heirs, especially when the property is inherited without a clear will.
Probate or letters of administration, if obtained
Probate is now voluntary in India after the deletion of Section 213 of the Indian Succession Act. However, court-backed documents may still be useful in disputed or high-value cases.
Property title documents
Sale deed, gift deed, partition deed, inheritance papers, Index II, property card, tax receipts, and other title papers help prove ownership history.
PAN and identity proof of NRI heir
PAN is needed for property sale, tax filing, TDS credit, and banking compliance in India.
Sale deed, if the property is sold
The sale deed records the transfer from the NRI seller to the buyer. It is essential for capital gains and repatriation records.
Capital gains calculation and tax records
Purchase cost, improvement cost, sale value, holding period, exemption details, and tax computation should be maintained.
TDS certificate
If TDS is deducted by the buyer, the NRI seller should collect the TDS certificate and verify that it reflects against their PAN.
Bank and repatriation documents
Banks may ask for tax documents, proof of inheritance, sale documents, Form 15CA, Form 15CB, NRO account details, and source of funds proof.
About WillJini
WillJini helps NRIs and families organise inheritance-related documents for Indian property. Inherited property often involves legal heir documents, succession papers, Power of Attorney, title transfer, sale documentation, tax records, and repatriation paperwork.
For NRIs, the challenge is not only understanding tax rules. The bigger challenge is having the right documents ready before sale, mutation, TDS compliance, or money transfer through an NRO account. WillJini helps simplify this documentation process so families can reduce delays and manage Indian inherited assets more smoothly.
FAQs
Do NRIs have to pay inheritance tax on property received in India?
No. India does not levy inheritance tax or estate duty on inherited property. An NRI does not pay tax only for receiving property through inheritance, will, or succession. Tax may arise later if the property earns rent or is sold.
Can an NRI inherit agricultural land in India?
Yes. An NRI can inherit agricultural land in India. However, direct purchase of agricultural land, plantation property, and farmhouses is restricted for NRIs. If inherited agricultural land is sold, RBI rules allow sale only to a resident Indian citizen.
Is capital gains tax applicable when an NRI sells inherited property?
Yes. Capital gains tax applies if the inherited property is sold for a profit. The original owner’s purchase cost and holding period are considered. Long-term gains are generally taxed at 12.5% without indexation, but eligibility for older indexation treatment should be checked before sale.
Is TDS deducted when an NRI sells inherited property in India?
Yes. The buyer must deduct TDS under Section 195 when buying property from an NRI. The NRI seller can apply for a lower TDS certificate under Section 197 before the sale if the actual tax liability is lower than the likely TDS.
Can NRIs repatriate money from inherited property in India?
Yes. NRIs can repatriate eligible inherited money or sale proceeds through an NRO account. RBI permits remittance up to USD 1 million per financial year, subject to tax compliance and bank documents such as sale deed, inheritance proof, Form 15CA and Form 15CB.
Does DTAA help NRIs selling inherited property in India?
DTAA may help if the same income is taxed in India and the NRI’s country of residence. India can tax gains from Indian property. The NRI may be able to claim foreign tax credit abroad, depending on the country and treaty rules.
Can WillJini help NRIs with inherited property documentation in India?
Yes. WillJini helps NRIs organise legal heir papers, succession documents, Power of Attorney, title records, sale paperwork, and repatriation-related documents. Proper documentation helps reduce delays during mutation, sale, TDS compliance, and bank remittance.
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