Can NRI sell inherited property in India tax implications?

Asked by: Patrick Conn  |  Last update: September 10, 2023
Score: 4.2/5 (3 votes)

Whether you are an NRI or an Indian resident, the tax provisions for sale of inherited property are the same. Since the property would have most likely been bought several years earlier, any profit made on sale of it will be taxed as long-term capital gains.

How to avoid paying capital gains tax on inherited property in India?

To avoidthe capital gains tax, the maximum eligible amount for investing is Rs 50 lakh in a financial year. Construct another house within three years, or purchase another home prior to the sale or within two years from the date of sale of the inherited home.

Is NRI selling property in India capital gains tax?

An NRI selling a property in India will have to pay tax on capital gains. On long-term capital gains, 20% tax is paid; on short-term capital gains, income tax is levied as per income tax slabs.

How to avoid capital gains tax when selling inherited property?

Here are five ways to avoid paying capital gains tax on inherited property.
  1. Sell the inherited property quickly. ...
  2. Make the inherited property your primary residence. ...
  3. Rent the inherited property. ...
  4. Disclaim the inherited property. ...
  5. Deduct selling expenses from capital gains.

How can I transfer my inheritance from India to USA?

You need to write the inheritance to the IRS and submit Form 3520, with your annual tax return details. According to U.S. regulations, if you are gaining or making a profit from the inherited property, including capital gains, dividends, or interests, you will need to pay tax on such inherited income.

What is the best way to sell Inherited Property? | NRI & Inherited Property FAQ

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How I can sell my property in India while I am in USA?

If you are a Non-Resident Indian, you can sell the property to a Resident Indian without restrictions. If the buyer is a Non-Resident Indian or a Person of Indian Origin (POI), you may need the approval of the Reserve Bank of India (RBI). You are not allowed to sell the property to a foreigner.

Can you sell property in India and bring money to USA?

Prior to transferring funds from India to the US you'll need to complete Form 15CB, and your bank will ask you to provide proof of the source of the money, such as a copy of the property sale agreement.

What is the tax loophole for inherited property?

When someone inherits investment assets, the IRS resets the asset's original cost basis to its value at the date of the inheritance. The heir then pays capital gains taxes on that basis. The result is a loophole in tax law that reduces or even eliminates capital gains tax on the sale of these inherited assets.

Is there capital gains tax on selling an inherited house?

When you inherit property, the IRS applies what is known as a stepped-up cost basis. You do not automatically pay taxes on any property that you inherit. If you sell, you owe capital gains taxes only on any gains that the asset made since you inherited it.

How do I report an inheritance to the IRS?

Form 8971, along with a copy of every Schedule A, is used to report values to the IRS. One Schedule A is provided to each beneficiary receiving property from an estate. Form 8971 InstructionsPDF. This item is used to assist in filing Form 8971.

Is property sold in India taxable in USA?

India and the US have a double taxation treaty in place. That means you shouldn't need to pay the same taxes twice when you sell your property in India. However, you'll likely still need to report the sale of your property to the IRS even if no tax is due.

Who are exempted from Indian capital gains tax?

Exemptions on Long-Term Capital Gains Tax

Residential Indians between 60 to 80 years of age will be exempted from long-term capital gains tax in 2021 if they earn Rs. 3,00,000 per annum. For individuals 60 years or younger, the exempted limit is Rs. 2,50,000 every year.

Can NRI sell property in India without coming to India?

Digital India has indeed made our lives easy and this is one of such examples. An NRI can sell property anytime but he or she will need some documents like: Title of the property (which is in the seller's name) Occupation Certificate from the municipal corporation in India.

Can a US citizen inherit property in India?

A Non-Resident Indian or a Foreign national such as UK, US or Canadian citizens can inherit the property in India from anyone including their relatives. The NRI can inherit property in India even from another NRI, subject to certain conditions.

Can NRI sell ancestral property in India?

An NRI can sell any property (Including an agricultural land or farm house) to a person resident in India. However, in case the NRI wishes to sell the inherited agricultural land or farm house the same can only be sold to an Indian resident.

What is long term capital gains tax on inherited property in India?

The long-term capital gains in case of property is taxed at the rate of 20 per cent. This is if you want to sell the property. Mere inheritance of the property does not attract any tax.

What happens if one person wants to sell an inherited house and the other doesn t?

Can majority rule in selling an inherited property? In California, “majority rule” is not the law of the land when it comes to selling an inherited property. When multiple people own real estate, any owner, including a minority owner, can bring a partition action if they wish to divest themselves of a property.

What happens when 3 siblings inherit a house?

Unless the will explicitly states otherwise, inheriting a house with siblings means that ownership of the property is distributed equally. The siblings can negotiate whether the house will be sold and the profits divided, whether one will buy out the others' shares, or whether ownership will continue to be shared.

How much can you inherit from your parents without paying taxes?

The federal estate tax exemption shields $12.06 million from tax as of 2022 (rising to $12.92 million in 2023).3 There's no income tax on inheritances.

Is the sale of inherited property split between siblings?

What happens if one person wants to sell an inherited house and the other doesn't? If you and your siblings cannot reach a compromise, you might have to take your case to court and ask the judge to file a suit for partition, where the judge will terminate your co-ownership and order the property for sale.

What is the 6 month rule for step up basis?

For inheritances, the basis is the fair market value of the asset at the time of the donor's death (or six months afterward, if the executor elects the alternative valuation date). This is referred to as “step-up in basis” (or “stepped-up basis”) because the previous basis is stepped up to market value.

What if an NRI sell property in India?

When an NRI sells property, the buyer is liable to deduct TDS @ 20%. In case the property has been sold before 2 years(reduced from the date of purchase) a TDS of 30% shall be applicable. NRIs can claim exemptions under Section 54, Section 54 EC, and Section 54F on long-term capital gains.

How much money can I transfer from India to USA tax free?

No, the money transferred to US from India is not taxable. But, if it exceeds US $100,000 for any current year, you must report it to the IRS by filing Form 3520. This is just an informational form with no taxes payable.

Can NRI repatriate money from India on sale of property?

For example, if the property was acquired for INR 1 crore and sold for INR 2 crore, then the maximum amount of money that can be repatriated is INR 1 crore. This is a simple rule that applies to all NRIs selling property bought using foreign currency.