Hey there! If you’re an NRI (Non-Resident Indian) and you’ve recently inherited property or assets in India—or expect to in the near future—this blog is going to walk you through everything you need to know about the tax implications on inherited property and assets in India.
Let us tell you upfront: Inheritance tax in India is a bit different from what you might be used to in countries like the US, UK, or Canada. Many NRIs are pleasantly surprised by how inheritance is treated under Indian tax laws—but don’t let that fool you.
There are still key rules and repatriation hurdles to be aware of, especially when you’re planning to sell or transfer the inherited assets abroad.
So, grab your cup of chai or coffee, and let’s dive in.
First Things First: What Is Inheritance?
Let’s clear the basics. What is inheritance? In simple terms, it refers to the assets—like property, cash, jewelry, or shares—that you receive when a relative passes away. These can be passed on through a will, or if there is no will, then according to the applicable succession laws.
As an NRI, you’re absolutely entitled to receive inheritance in India—whether it’s land, a house, fixed deposits, or listed shares and securities. But naturally, your next question is probably…
Suggested Read:
NRI Inheritance for Real Estate or Property in India: All You Need to Know
Is There an Inheritance Tax in India for NRIs?
The good news? There is no inheritance tax in India.
That’s right—India does not levy any tax on inheritance. So, whether you inherit a sprawling bungalow in Delhi or a bunch of stocks from your grandfather’s portfolio, you won’t have to pay tax simply for receiving them.
But don’t get too comfortable yet. The tax story begins after you inherit the asset—especially when you earn income from it or decide to sell it.
Consult Ashwarya Sinha – a top-notch Inheritance Lawyer in India
Income from Inherited Assets: What You Need to Know
Let’s say you’ve inherited a flat in Mumbai, and you rent it out. That rent? It’s considered income from inherited asset, and yes—it is taxable.
In India, income earned from such assets is added to your total income and taxed as per the applicable income tax slab. Even if you’re not living in India, if you earn income from an Indian source, you’re liable to pay tax on it.
Heads up for NRIs: Rental income from Indian property is taxable in India regardless of your country of residence. You’ll need to file an Indian tax return (ITR) and declare that income. Double taxation avoidance agreements (DTAAs) may help you avoid being taxed twice—once in India, and again in your country of residence.
Sale of Inherited Asset: Now Things Get Taxed
This is where it gets real.
Let’s say you inherit land or a house and decide to sell it later. Now, there’s capital gains tax involved.
Here’s how it works:
- The cost of acquisition is considered to be the price your original owner (say, your father or grandmother) paid for the asset.
- When you sell, the capital gain is calculated based on the difference between that original cost (adjusted for inflation using indexation) and your selling price.
- If you held the inherited property for more than 24 months (which is likely), it’s considered a long-term capital gain (LTCG).
- LTCG on real estate is taxed at 20% (plus surcharge and cess).
So yes, while there’s no tax on inheritance in India for NRIs, selling inherited assets can trigger a tax event. It’s vital to maintain all documents related to acquisition, improvements, and sale.
Also important: If you sell listed shares and securities that you’ve inherited, similar capital gain rules apply, but the holding period and tax rate may differ (LTCG on listed shares is 10% after ₹1 lakh of gains without indexation).
Must Read:
Guidelines for NRIs to Buy Property in India: Legal Tips, Rules & Must-Know Insights
How Does Repatriation Work?
Okay, now you’ve sold the inherited flat or received rental income, and it’s sitting in your Indian bank account. Can you transfer it abroad?
Yes, but there are rules—this is where repatriation rules for inheritances come in.
Here’s what the RBI allows:
- NRIs can repatriate up to USD 1 million per financial year, including sale proceeds of inherited assets, under the Liberalized Remittance Scheme (LRS).
- You’ll need to provide documents like:
- Proof of inheritance (Will, legal heir certificate, succession certificate, etc.)
- PAN details
- Tax clearance certificate or Form 15CA/15CB
- Proof of property sale
- Documentary evidence of cost and acquisition
It’s important to route funds through NRO accounts and follow the formal remittance procedures to avoid delays or penalties.
International Inheritance Tax: What If I’m in the UK, US, or Canada?
Here’s a crucial twist.
Even though India does not have an inheritance tax, your country of residence might.
For example:
- In the US, estate tax can apply if the total value of the inherited assets exceeds a certain threshold.
- In the UK, there’s inheritance tax on estates worth more than £325,000, even if the assets are located in India.
- In Canada, while there’s no inheritance tax per se, the deceased’s estate may pay capital gains tax before transferring the asset.
So, while you don’t pay tax in India when you inherit, it’s essential to check how your home country treats international inheritance tax.
Consulting a cross-border tax expert or chartered accountant is highly recommended in such cases.
Quick Tips for NRIs Dealing with Inherited Assets
Let’s make your life easier. Here’s a quick checklist:
- Check documentation: Ensure you have the Will, succession certificate, or legal heir certificate.
- Update title: Transfer the inherited asset to your name at the registrar’s office.
- PAN is mandatory: For income or sale of inherited assets, you must have a PAN card.
- File tax returns in India: Especially if you earn income from inherited property.
- Repatriation planning: Plan well to comply with RBI norms and avoid exceeding the $1 million limit.
- Keep proof of acquisition cost: Vital for capital gains calculation.
- Double-check international tax laws: To avoid surprises in your country of residence.
In a Nutshell
So here’s the takeaway: No, you don’t pay inheritance tax in India as an NRI—but there are definite tax liabilities once you start earning from, or selling, your inherited assets.
From income tax on rental earnings, to capital gains tax on sales, and strict repatriation rules, there’s a fair bit to manage. Plus, international inheritance tax laws can affect your final post-tax earnings.
It’s a great idea to consult both an Indian CA and an international tax advisor before taking action. Better safe than sorry, right?
Final Thoughts
Being an NRI comes with a global lens—and a lot of paperwork. But don’t let tax rules keep you from enjoying what your loved ones left behind. With the right knowledge and planning, you can honor their legacy while making smart, tax-efficient decisions.
Feel free to bookmark this post or share it with fellow NRIs—because tax on inheritance in India for NRIs is something all of us should understand better.
Need help navigating repatriation or calculating capital gains on inherited property? Let us know— the Chambers of Ashwarya Sinha be happy to guide you through it.
Until next time, take care and plan wisely!
For seeking personalised information regarding the legal remedies available contact us at: info@ashwaryasinha.com and office@ashwaryasinha.com
