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Inheriting Property in India as an NRI

NRIs (Non-Resident Indians) can inherit any type of property in India, including agricultural property, plantation, or farmhouses. Here’s what you need to know:

Inheritance Tax

• Inheritance tax, commonly known as Estate Tax/Duty, has been abolished in India. Therefore, no estate duty is paid when inheriting property.

Selling Inherited Property

1. Title Transfer:

   • The title of the inherited property must be transferred from the original owner to the NRI.

   • Restrictions: Certain properties, like agricultural land, plantations, and farmhouses, can only be sold to Resident Indians who are Citizens of India. The same rule applies if the property is gifted instead of sold.

2. Capital Gains Tax:

   • When an inherited property is sold, capital gains tax needs to be paid.

   • Calculation: The capital gain is calculated as the realized value minus the cost when the property was acquired by the original owner, adjusted for inflation using indexing rules of the Indian Income Tax.

   • Tax Saving Options: There are ways to save on capital gains tax, such as:

     • Reinvesting the sale proceeds in new property.

     • Investing in capital gain tax-saving bonds that qualify under Section 54EC of the Income Tax Act.

3. Gifting Inherited Property:

   • If the inherited property is gifted instead of sold, there are exemptions when the property is gifted to certain relatives.

   • Gift tax needs to be paid if the property is gifted to others.

Repatriation of Sale Proceeds

• NRIs can repatriate proceeds from the sale of inherited property up to $1 million per year, subject to certain formalities.

• The sale amount in the NRO (Non-Resident Ordinary) bank account can be transferred to the NRE (Non-Resident External) bank account.

• Required Forms:

  • Form 15CA: Self-declaration form.

  • Form 15CB: Certificate from a practicing Chartered Accountant for tax clearance.

• Banks in India dealing in foreign exchange can facilitate the transfer of money from the NRE account to an account in the USA.

For more detailed information, you can refer to the  Income Tax India website.