A flat from a parent. Ancestral land from a grandparent. Sooner or later many NRIs hold Indian property they never bought — and then decide to sell. The tax rules for inherited property have two quirks that surprise people: the cost basis is not yours, and the clock did not start with you. Here is how the 2026 computation, TDS and repatriation actually work.
Inheriting is not the taxable event — selling is
India has no inheritance tax. Receiving property under a will or by succession does not create an Indian tax liability for you, whatever the property is worth. The tax question arises only when you sell — and then the entire history of the property comes back into the calculation.
How the gain is computed on inherited property
Your cost is the previous owner's cost
You did not pay for the property, but the law does not treat your cost as nil. The cost of acquisition is what the previous owner paid, plus any improvement costs either of you incurred. If your father bought the flat for ₹20 lakh and you sell it for ₹1.2 crore, your starting computation is a gain of roughly ₹1 crore — his cost becomes yours.
Your holding period includes the previous owner's
The second quirk works in your favour. The holding period counts from the previous owner's acquisition date, not from the date of inheritance. Since the long-term threshold for property is 24 months, almost all inherited property is long-term the day it reaches you. You could inherit in January and sell in March and still have a long-term gain.
The rate: 12.5%, no indexation, no resident-only options
Long-term gains on property transferred on or after 23 July 2024 are taxed at 12.5% without indexation — a regime that continues unchanged under the Income-tax Act, 2025. One important nuance for NRIs: resident individuals and HUFs selling land or buildings acquired before 23 July 2024 may pay the lower of 12.5% without indexation or 20% with indexation. That choice is not available to NRIs. For you, the computation is 12.5% flat on the unindexed gain, plus surcharge and 4% cess.
The short version
No tax on inheriting. On sale: previous owner's cost, previous owner's clock, long-term gain at 12.5% plus surcharge and cess — with no indexation option for NRIs. The buyer deducts TDS on the full price unless you obtain a lower-TDS certificate first.
A worked example
Your father bought a Secunderabad flat in 1998 for ₹20 lakh and spent ₹5 lakh on improvements. You inherit it in 2025 and sell it in 2026 for ₹1.2 crore.
- Holding period: counted from 1998 — long-term by decades, even though you have owned it for months.
- Gain: ₹1.2 crore minus ₹25 lakh of cost — ₹95 lakh, with no indexation available to you as an NRI.
- Tax: 12.5% on ₹95 lakh is about ₹11.9 lakh, plus surcharge and 4% cess.
- TDS if you do nothing: the buyer deducts on the full ₹1.2 crore at the effective long-term rate — about ₹17.9 lakh at 14.95% — several lakh more than the tax, recoverable only through your return.
The figures are illustrative, but they show why the certificate route below is the default advice on inherited sales: low historic cost makes full-price TDS overshoot badly, and where a reinvestment exemption applies the right deduction may be close to nil.
TDS on the sale
Inheritance changes the computation, not the withholding. The buyer of property from an NRI must deduct TDS on the full sale consideration — at the long-term rates of about 13% to 14.95% including surcharge and cess — obtain a TAN, and file Form 27Q. There is no ₹50 lakh threshold. The full mechanics are in our guide to TDS on sale of property by an NRI.
Inherited sales are, in fact, the strongest candidates for a lower or NIL TDS certificate (Form 128, earlier Form 13, under Section 395 of the 2025 Act). Where the previous owner's cost is low, TDS on the full price can overshoot even a large actual tax bill; where exemptions will absorb the gain, the certificate can bring the deduction to nil. Apply before the sale closes — the process and timelines are in our lower TDS certificate guide.
With inherited property, the documents are the bottleneck, not the law — a fifty-year-old purchase deed, a will, a succession certificate. Start assembling the file before you list the property.
Exemptions and reinvestment options
The reinvestment exemptions apply to inherited property just as to purchased property:
- Section 82 of the 2025 Act (earlier Section 54): reinvest the gain from a residential house into another residential house in India, within the prescribed windows.
- Section 86 (earlier 54F): for assets other than a residential house — such as inherited land — invest the sale consideration in a residential house in India.
- Section 85 (earlier 54EC): invest the gain in specified bonds, up to the ₹50 lakh cap.
Each has conditions on timelines and on holding the new asset, and the choice interacts with your repatriation plans — money parked in bonds or a new house is money not remitted. Plan the exemption and the remittance together, not sequentially.
The document file to assemble
Almost every delay in an inherited-property sale traces back to one missing paper. Before listing the property, gather:
- Title chain: the previous owner's purchase deed, and the will, probate, succession certificate or legal-heir certificate that brought the property to you, plus mutation records in your name.
- Cost evidence: the original purchase price and any improvement bills — the older the property, the harder these are to find and the more they matter.
- Your identifiers: PAN, passport/OCI, and your NRO account details for the proceeds.
- Tax workings: the capital-gains computation, which feeds the Form 128 certificate application, the buyer's deduction, your return, and the Form 146 remittance certificate — one computation, four uses.
Repatriating the proceeds
The proceeds land in your NRO account, and the standard chain applies: remittance under the USD 1 million per financial year scheme through your AD bank, with Form 145 (earlier 15CA) and a CA certificate in Form 146 (earlier 15CB) where the taxable remittance exceeds ₹5 lakh in the year. For inherited funds the bank will additionally want the legal chain — the will, succession certificate or legal-heir documentation — alongside the sale deed and tax computation. The complete process is in our guide to repatriating money from India.
A practical note on sequencing: if the estate is still being divided, settle the legal title first. Banks and buyers both stall on properties where the mutation or succession paperwork is incomplete, and TDS mechanics get messy when multiple legal heirs sell jointly — each heir is a separate seller with a separate computation.
S. K. Lahoti Associates handles inherited-property sales for NRIs end to end — gain computation from old records, the lower-TDS certificate, exemption planning and the repatriation file — as described under our NRI services. If you are planning such a sale, you can reach the firm here.
Frequently asked questions
The cost to the previous owner — what your parent or relative originally paid (plus their improvement costs), not the value on the date you inherited. Inheriting itself is not a taxable event in India; tax arises only when you sell.
From the previous owner's acquisition. The period the deceased held the property is added to yours, so most inherited property is long-term (more than 24 months) on the day it is inherited — taxed at 12.5% plus surcharge and cess.
No. The option to pay the lower of 12.5% without indexation or 20% with indexation on land or buildings acquired before 23 July 2024 is available only to resident individuals and HUFs. For an NRI seller the long-term computation is 12.5% without indexation.
Yes — exactly as for any NRI sale. The buyer deducts on the full sale price at the long-term rate of about 13% to 14.95% including surcharge and cess, files Form 27Q, and the seller can apply for a lower or NIL TDS certificate in Form 128 (earlier Form 13) before the sale.
Yes, through your NRO account within the USD 1 million per financial year scheme — with the inheritance paper trail (will or succession documents), the tax computation, and Form 145/146 (earlier 15CA/15CB) certification where applicable.