Do note that whether a property is inherited by you through a Will or through intestate succession:

• Additional documents may be required depending upon other factors. For instance, if the property is mortgaged, the registrar might ask for the mortgage deed, No-Objection Certificate (NOC) from the financier, etc. Further, the registrar might ask for the documents to be notarised; and

• You may not be required to pay stamp duty on the transfer of property through inheritance depending on the applicable state-specific Stamp Act and other notifications, circulars issued by local governments. Please reach out to a local lawyer for more details on this.

Once the requisite documents are provided and other formalities are complied with, the registrar would transfer and register the property in your name.

If you cannot travel to India, you may execute a valid Power of Attorney (PoA) in favour of a trusted person to undertake necessary formalities on your behalf.

After the transfer of ownership in your name, you can evaluate various options such as retaining the property, selling the property or giving the inherited property on rent.

Sale of inherited property

An NRI can sell the inherited property to:

• Indian resident: any immovable property (including commercial, residential, agricultural including farmhouse) in India;

• NRI or OCI: any immovable property other than any plantation property, agricultural land, or farmhouse in India

Tax liability for an inherited property as an NRI

There is no tax on inheritance of property, however, any income (such as rental income) attributable to that property shall be subject to tax.

When selling immovable property, it is important to consider the capital gains tax. Capital gain tax will be long-term or short-term depending on whether the immovable property is a long-term or short-term capital asset. If you have held the property for more than 24 months, it will be considered as a long-term capital asset. Otherwise, it will be considered as a short-term capital asset. If the property has been inherited/gifted (from close relatives*), then you also need to include the period of ownership of the previous owner. Long-term capital gains generally attract lower tax rates as compared to short-term capital gains.

*Close relatives such as brother (or stepbrother), daughter, son-in-law, father (or stepfather), mother (or stepmother), member of Hindu Undivided Family (HUF), sister, son (or stepson), daughter-in-law and spouse.

Saving long capital gain tax by making specified investments

Long-term capital gains can be saved either by investing in/constructing of another residential property in India within two/three years of the sale of the first property, respectively or by investing the profits in an approved bonds or ‘capital gains exemption scheme’. 

Repatriation of the sale proceeds after selling the inherited property

Broadly, the authorised dealer (bank) may allow repatriation of the sale proceeds (from the sale of immovable property other than agricultural land, farmhouse and plantation property) outside India, provided the following conditions are satisfied by you as an NRI or an OCI: 

• The immovable property was acquired in accordance with the provisions of the foreign exchange law in force at the time of acquisition; 

• The payment for the acquisition of the immovable property was paid in foreign exchange received through appropriate banking channels or out of the funds held in a Foreign Currency Non-Resident Bank (FCNR (B)) account or Non-Resident External (NRE) account; and 

• Repatriation of sale proceeds for residential property is restricted to maximum of two such properties.  

Depending on the circumstances prevailing at the time of sale of the immovable property in India, you may also require an approval from the Reserve Bank of India (RBI) for repatriation of sale proceeds. Also note that the authorised dealer (bank) may allow an NRI to remit up to USD 1 million per Financial Year (April-March) from NRO account. This amount is inclusive of:

• The balances held in their Non-Resident Ordinary Account (NRO)

• Sale proceeds of assets; or

• Assets acquired in India by way of inheritance.

In case you want to remit more that USD 1 million in a Financial Year, you should seek approval of RBI by applying through your authorised dealer (bank). RBI grants approval on a case-to-case basis..

Click here to understand more about the process involved in selling the property along with repatriation of the sale proceeds.

Open an NRI Account