I have inherited my mother’s properties and other assets in India. I live in Australia and have NRI status. Will I need to pay taxes on the sales proceeds?

Sauparnika Sauparnika
Answered on February 10,2020

Yes, you can sell properties and other assets inherited by you from your mother. Gains on sale of property and other capital assets is taxed under the head capital gains in your income tax return. You must pay tax on gains made from sale of these assets. Capital gains will be calculated on them as if these were your own assets. Capital gains are basically sale proceeds less indexed cost of acquisition. The cost of acquisition of the owner shall be the cost of acquisition for you. You can also index the cost according to the year of purchase of the original owner.

These gains are classified as Long-Term Capital Gains (LTCG) when the property is sold after 2 years of holding, and short-term capital gains when sold within 2 years of holding. Other assets may have a separate period for classification as long term and short term. This bifurcation is important as it helps identify the applicable tax rate. Long-term gains from sale of property are taxed at 20%, while short-term gains are added to your total income and taxed according to the slab applicable to you.

As per the income tax Act in India, tax must be deducted at source (TDS) on a payment made to an NRI. So, when you sell a property in India, the buyer has to deduct TDS at 20% if your gains are long term, and 30% if your gains are short term. You may apply for a nil TDS certificate to your income tax officer if you do not want TDS to be deducted or plan to claim capital gains exemption by investing your gains as allowed in the income tax Act. You must file an income tax return to report these transactions, gains made, and capital gains exemption claimed, whether or not any tax is payable by you. These gains may also have to be reported in your country of residence.