My sister is a US citizen who has got her share in our father’s property inherited through a Will. What is her tax liability? Will she also need to file an income tax return (ITR) for the same? Will she also have to convert the inheritance received in Indian rupees to US dollars for remittance purposes? Also clarify the law under Reserve Bank of India (RBI) and Foreign Exchange Management Act, 1999 (FEMA, 1999) regarding remittance?
There is no tax under the Indian tax laws when one inherits any property. The tax liability arises at the time of sale of the asset. The share in the profits on sale of an inherited property will be taxed under the head capital gains and taxed as short-term or long-term depending on the period for which the property was held by the current holders along with the previous owner who had paid for it. If the combined period is more than two years it will be taxed as long-term capital gain (LTCG) and taxed at 12.50 per cent plus cess and surcharge of the proportionate share of profits without indexation.
Your sister has to use ITR 2 for this purpose as she will have capital gains and also for the fact that she is a non-resident. The Indian rupees will be converted into US dollars based on the exchange rate on the date of remittance. The money can be remitted through banks which are authorised to deal in foreign currency and which are called authorised dealers. No specific permission is required to be obtained from RBI for such remittance if the amount of remittance does not exceed $1 million per year. Your sister may have to submit a certificate from a CA for remitting the money abroad.
A residential flat is inherited by two daughters (A B), in equal share. Daughter A is currently residing in the flat. Since it is a family matter and also on humanitarian grounds no compensation is being given by daughter A to B for using the flat. Now daughter A’s son wants to claim house rent allowance (HRA) in his personal tax return and therefore is paying rent to his mother (A). However, the flat belongs to both A and B. Should not the rent amount be split equally and shown as income in both the daughters personal income tax returns?
Yes, you are right. The rent of a property accrues to the owners in their respective ownership ratio. Had the flat not fetched any rent, B could have treated the flat as self-occupied but in case it is let out even partly, the rent has to be apportioned between both the legal owners.
I was a non-resident Indian (NRI) and have recently permanently returned to India in March 2026. I have a non-resident external (NRE) account (rupee deposits) as well as an foreign currency non-resident (FCNR) account with ICICI bank. Can I transfer money from my NRE (rupee deposits) account to another bank's fixed deposits now? What are the tax implications? What is the taxation with FCNR accounts?
Since you have come back to India for good, you have become a resident for FEMA purposes. So first of all you need to get all these accounts designated as regular resident accounts, by informing your bankers about the fact of change of your residential status under FEMA,1999. Yes, you can transfer your money in the NRE account to your regular account. You can continue with your FCNR deposits till its tenure.
The interest on FCNR account will be tax-free till you remain non-resident or resident, but not ordinary resident under income tax laws.
The author is a tax and investment expert and can be reached on jainbalwant@gmail.com
(Disclaimer: Views expressed are the author’s own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.)
