NRIs can inherit any property in India, even if agricultural property, plantation or farm house. Inheritance tax is commonly known as the Estate Tax/Duty in India. However, his has been abolished in India so there is no estate duty paid for inheriting property.
To sell the property, for real estate, the title needs to be first transferred from the original owner. There are restrictions on whom certain property such as agricultural land, plantation and farmhouse can be sold to, i.e. only to a Resident Indian who is a Citizen of India. The same rule applies if the property is gifted instead of sold.
Capital Gain taxes need to be paid when inherited property is sold, calculated as realized value less the cost when property acquired by original owner subject to factoring inflation via indexing rules of Indian Income Tax. There are avenues to save of the capital gains tax on the inherited property, such as reinvest sale proceeded in new property or say invest in capital gain tax saving bonds that qualify under 54EC of the Income Tax Act.
In case of gift of inherited property to someone else, instead of sale, there are exemptions when property is gifted to certain relatives, else gift tax needs to be paid.
Repatriation of proceeds from sale of inherited property is possible up to $1 million per year subject to certain formalities. The sale amount that was in the NRO bank account is transferred to the NRE bank account after filling in forms needed for tax clearance namely form 15CA for self declaration and 15CB from which is a Practicing Chartered Accountant’s certificate. All the banks in India dealing in foreign exchange can transfer money from the NRE account to your account in USA.
