Moment guide · FY 2026-27

I inherited property abroad

Do I pay Indian tax on inherited foreign property?

Inheriting foreign property attracts no Indian inheritance tax, but income from it is taxable when received. Your cost for a later sale is the FMV at the date of inheritance under section 49(1), with LTCG at 12.5% without indexation if held over 24 months, and section 54's application to a foreign house is debated. Schedule FA disclosure starts from your first ROR year, and FEMA compliance applies to resident-held foreign assets.

The #1 trap

Assuming section 54 reinvestment works for a foreign property — the residential-house exemption is generally applied to Indian residential property, and its application to a foreign house is debated, so the gain may be fully taxable at 12.5%. Also, Schedule FA disclosure starts from your first ROR year, and a resident holding an inherited foreign asset must comply with FEMA's reporting and permission requirements.

Meera, who inherited her grandfather's flat in London

Meera inherits her grandfather's flat in London in 2024, when its fair market value is £350,000, converted at ₹104 per pound, giving ₹3,64,00,000. India levies no inheritance tax or estate duty, so receiving the flat triggers no Indian tax. Meera is a resident and ordinarily resident, so in her first ROR year she discloses the London flat in Schedule FA, along with the UK bank account connected to it. Under FEMA, a resident holding a foreign asset acquired by inheritance must report it and, depending on the circumstances, seek RBI permission; Meera files the relevant FEMA declaration through her bank. In 2026 she sells the flat for £420,000, which is ₹4,36,80,000. Under section 49(1), her cost is the FMV at the date of inheritance, ₹3,64,00,000, and her holding period runs from the grandfather's original acquisition, which is far beyond 24 months, so the gain of ₹72,80,000 is long-term, taxed at 12.5% without indexation after Finance Act 2024, giving ₹9,10,000 before surcharge and cess. Meera considered reinvesting the gain in a house in India under section 54, but the exemption's application to the sale of a foreign residential property is debated, and on a conservative basis she models the full ₹72,80,000 as taxable. She pays UK capital gains tax on the sale and claims the foreign tax credit via Form 67 filed before the ITR due date. The sale proceeds are repatriated to India through banking channels with Form 15CA/CB where applicable. A quick call with us dials in the final figure. Meera also checks the FEMA position on resident-held foreign assets: a resident who inherits a foreign asset must report it and, in some cases, obtain RBI permission, and the timelines are enforced through the bank. The Schedule FA disclosure from her first ROR year covers the London flat and the UK bank account, and the values are reported in INR at the year-end rate. If she sells the flat and the proceeds are repatriated, the inward remittance is processed through banking channels with the applicable forms. The UK capital gains tax on the sale is creditable in India through Form 67, subject to the Indian tax on the same gain. A quick call with us dials in the final figure.