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🏡📘 NRI Property Tax Explained — Real Questions, Real Answers
If you're an NRI dealing with inherited property in India, this post will help you understand the tax rules, TDS deductions, and how to repatriate funds abroad with full legal clarity.
❓ Question :
“I’m an NRI and recently inherited a property in India from my late father. If I decide to sell it now, what taxes will I need to pay? Also, how can I legally transfer the sale proceeds to my overseas bank account?”
✅ Answer:
1️⃣ Tax at the Time of Inheritance:
There is no inheritance tax in India. Simply inheriting property from your father does not attract any tax.
2️⃣ Tax When You Sell the Property:
Once you sell the inherited property, the capital gains tax applies.
If the property was held for more than 24 months (including your father’s ownership), it is treated as a long-term capital asset
Long-Term Capital Gains (LTCG) are taxed at 20%, with the benefit of indexation (adjusting purchase price for inflation)
The cost of acquisition is calculated based on your father’s original purchase price, and the holding period includes the time he held the property
3️⃣ Repatriation of Sale Proceeds:
First, deposit the sale proceeds into your NRO (Non-Resident Ordinary) account
You are allowed to repatriate up to USD 1 million per financial year (April–March) from inherited assets
To repatriate funds, submit:
Form 15CA (self-declaration to Income Tax Department)
Form 15CB (certificate from a Chartered Accountant)
If you want to repatriate more than USD 1 million, you need to seek approval from the Reserve Bank of India (RBI)
4️⃣ Tax Exemptions to Save Capital Gains Tax:
Section 54: If you reinvest the gains into another residential property in India within 2 years (or construct one within 3 years), you can claim full or partial exemption
Section 54EC: If you invest the gains in specified bonds (like NHAI or REC) within 6 months, exemption up to ₹50 lakh is available
❓ Question :
“My father purchased a flat in Pune but passed away without making a will. The property was equally inherited by me and my three sisters. Later, one sister and I bought out the shares of the other two and became co-owners. My sister is now a U.S. citizen. We recently sold the flat. What is the TDS rate applicable to my sister’s share of the proceeds as an NRI?”
✅ Answer:
Since your sister is a Non-Resident Indian (NRI), any capital gain she earns from selling property in India is subject to TDS under Section 195 of the Income Tax Act. Here’s how it works:
1️⃣ If the Property is a Long-Term Capital Asset:
If the property was held for more than 24 months (including your father’s ownership period), it is considered a long-term capital asset
The TDS rate applicable is 20% on the capital gains
After adding cess (4%) and surcharge (if applicable), the effective TDS rate may go up to 23.92%
2️⃣ If the Property is a Short-Term Capital Asset:
If held for less than 24 months, the gains are treated as short-term and taxed as per the applicable income tax slab
In this case, TDS is deducted at 30%, plus cess and surcharge
3️⃣ TDS Responsibility:
The buyer of the property is legally obligated to deduct this tax before making payment to the NRI seller
This TDS must be deposited with the Income Tax Department
4️⃣ Claiming Refund or Lower TDS Deduction:
If the TDS deducted is more than the actual tax liability, your sister can file an Income Tax Return (ITR) in India to claim a refund
Alternatively, she may apply for a lower or NIL TDS certificate by submitting Form 13 to the Income Tax Department in advance
5️⃣ Repatriating Her Share Abroad:
Her share of sale proceeds must be credited to her NRO account in India
Repatriation can be done up to USD 1 million per financial year using Form 15CA/15CB
📌 Pro Tip:
For any property transaction involving NRIs, it is strongly recommended to consult a Chartered Accountant or tax consultant familiar with NRI taxation and FEMA guidelines to ensure compliance and avoid penalties.
💬 Know someone dealing with inherited property or co-owning with an NRI? Share this with them — it could save them lakhs in taxes and legal hassle.
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