Selling a property you've inherited in India comes with a layer of complexity that selling a self-purchased property doesn't — the cost of acquisition isn't what you paid (you likely paid nothing), and as an NRI, the buyer's TDS obligation and your own repatriation limits both need separate attention.
Quick Summary
- Buyer must deduct TDS: 12.5% (plus surcharge/cess) on LTCG, or 30% (plus surcharge/cess) on STCG
- Cost of acquisition = what the original owner paid (or FMV as on 1 April 2001, if acquired before that) — the previous owner's holding period counts toward yours
- Apply for a Form 13 lower/nil TDS certificate before the sale to avoid excess deduction
TDS the Buyer Must Deduct
| Gain Type | Holding Period | TDS Rate (before surcharge/cess) |
|---|---|---|
| Long-Term Capital Gains (LTCG) | More than 24 months | 12.5% |
| Short-Term Capital Gains (STCG) | 24 months or less | 30% |
How Holding Period and Cost Are Calculated for Inherited Property
Since inheritance itself isn't treated as a 'transfer' for capital gains purposes, two special rules apply, and both work in your favour: your holding period includes the time the property was held by the previous owner (so a property bought by your father in 1995 and inherited by you in 2020 is almost certainly long-term, regardless of how recently you inherited it), and your cost of acquisition is what the original owner actually paid for it — or, if it was acquired before 1 April 2001, you can use the property's fair market value as on 1 April 2001 instead, whichever benefits you.
Exemptions Still Available
Section 54 (reinvestment in another residential property) can be available, subject to the standard conditions applicable to any long-term residential property sale — this isn't lost simply because the property was inherited. Additionally, Section 54EC allows exemption by investing the long-term capital gain in specified bonds (NHAI/REC) within 6 months of the sale, capped at ₹50 lakh per financial year, with a 5-year lock-in.
Reduce the TDS Upfront — Apply for Form 13
Don't Wait to Claim a Refund Later
The 12.5%/30% TDS rates apply on the full sale value in many practical scenarios unless a lower/nil deduction certificate is obtained in advance — not just on your actual gain. If your genuine tax liability (after cost of acquisition and any exemption) is meaningfully lower than what straight TDS would deduct, apply for a Form 13 lower/nil TDS certificate from the Assessing Officer before the sale closes. Without it, you'd otherwise have to wait until you file your ITR to claim the excess back as a refund — tying up your money for months.
Repatriating the Sale Proceeds
Once tax is settled, repatriating proceeds abroad is capped at USD 1 million per financial year (inclusive of all other remittances from NRO-route funds), and requires Form 15CA (Part C) along with a CA-certified Form 15CB for the remittance.
Getting the TDS certificate and cost-of-acquisition documentation right before the sale closes saves months of refund-waiting later. Rajput Lalit & Associates handles capital gains computation, Form 13 lower-TDS applications, and Form 15CA/15CB filing for NRI property sales. See our NRI Lower TDS Certificate checklist and NRI Fund Repatriation guide, or use our NRI Property TDS Calculator.
Frequently Asked Questions
I inherited the property 2 years ago but my father bought it 20 years ago — is my gain long-term?
Yes. For capital gains purposes, your holding period includes the previous owner's holding period, so this would almost certainly qualify as long-term capital gains, taxed at 12.5%, regardless of how recently the property actually came to you.
What if I don't know what the original owner paid for the property?
If the property was acquired before 1 April 2001, you can use its fair market value as on that date instead of the actual historical cost — a registered valuer's report is typically used to establish this, especially when original purchase records aren't available.
Can I avoid all TDS if I plan to reinvest the gain under Section 54?
You can't avoid TDS automatically just by planning to reinvest — the buyer's TDS obligation exists independently. The correct route is applying for a Form 13 lower/nil deduction certificate in advance, which factors in your planned exemption, rather than paying full TDS and waiting to claim a refund.
Does the buyer need a TAN to deduct TDS on my property sale?
Yes — since you're an NRI seller, the buyer must obtain a TAN (not just use their PAN, which would be sufficient for a resident seller transaction) and deposit the TDS under the applicable NRI-specific provision before filing the relevant TDS return.
Is there a way to sell without any TDS deduction at all?
Only via a nil-deduction Form 13 certificate, if your computed tax liability genuinely comes to zero after exemptions — otherwise, some TDS will apply, and the goal becomes getting the rate correctly reduced rather than eliminated.
Capital gains and TDS rules for NRI property transactions are governed by the Income-tax Act and are subject to amendment (including under the Income-tax Act, 2025 from FY 2026-27). This article reflects the position as commonly understood as of September 2026 — please get your specific transaction reviewed by a professional before the sale.