Moving abroad does not revoke an NRI's right to inherit property in India, according to latest reports from Mint. NRIs can inherit various properties including residential properties, commercial properties, agricultural land, and farmhouses, similar to other Indian citizens. However, NRIs are prohibited from purchasing agricultural land but are allowed to inherit it from parents or family members (in case there is a will). Upon inheriting agricultural land, an NRI can only sell it to a resident Indian. Property inheritance by NRIs is governed by the Foreign Exchange Management Act (FEMA) and the Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations, 2018.
An India resident selling an inherited Singapore property may face capital gains tax in India, with the acquisition cost and holding period linked to those of the previous owner. According to reports from Mint, since the assessee has been residing in India for the last decade, they would qualify as a resident under the Income-tax Act, 2025 (ITA) and be liable to tax on global income. Any gain arising from the transfer of a capital asset is taxable under the head 'Capital Gains', making immovable property sales subject to Indian taxation.
For computing capital gains when a capital asset is acquired by inheritance, the cost of acquisition (COA) shall be deemed to be the cost for which the previous owner acquired it, and the period of holding shall include the period for which it was held by the previous owner. As reported by Mint, in cases where the property was acquired before 1 April 2001, the assessee has the option to adopt either the actual COA to the father or the fair market value (FMV) of the property as on 1 April 2001 as their COA. However, where the FMV as on 1 April 2001 is adopted, such FMV shall not exceed the stamp duty value, wherever available, as on 1 April 2001.
Since the property was acquired before 23 July 2024 by the father, the grandfathering provision applicable to a resident taxpayer would apply. According to Mint reports, the assessee can compare the tax liability at 20% with indexation against the tax liability at 12.5% without indexation and adopt the option resulting in the lower tax liability. This provision allows for significant tax optimization based on the specific circumstances of the property acquisition.
Since the property is situated in Singapore, the capital gain would be computed in the relevant foreign currency and converted into Indian rupees using the State Bank of India (SBI) Telegraphic Transfer (TT) buying rate prevailing on the last day of the month immediately preceding the month of transfer. As reported by Mint, Singapore generally does not impose capital gains tax on the sale of Singapore property, including in the case of a non-resident. However, gains may be taxable in Singapore where the property is treated as being bought and sold as part of a trading activity.
NRIs can repatriate up to $1 million per financial year without prior RBI approval if the property was acquired through inheritance from an Indian resident, from a person who retired in India, or from a spouse resident in India who inherited the property. Repatriation exceeding $1 million requires mandatory prior RBI approval. Indian tax may become an actual tax outflow for the assessee unless they opt for the tax exemption available upon reinvestment in a qualifying asset in India. According to Mint analysis, this exemption provides a significant opportunity to reduce or eliminate the tax liability on inherited overseas property sales.
