Selling an inherited overseas property? Here’s how India taxes the gain
I inherited a Singapore property from my NRI father recently. I returned to work in India a decade ago and have been a resident in India since then. My father had acquired this property about 35 years ago. I don’t want to retain the property but want to sell it. What will be the tax implications in India?
– Name withheld on request
Since you have been residing in India for the last decade, it is assumed that you would qualify as a resident of India under the Income-tax Act, 2025 (ITA), and would accordingly be liable to tax in India on your global income. Under the provisions of the ITA, any gain arising from the transfer of a capital asset is taxable under the head ‘Capital Gains’. Since immovable property is a capital asset, its sale by you would give rise to capital gains, which would be taxable in India.
For computing the capital gain, where a capital asset is acquired by the assessee by way of inheritance, the cost of acquisition (COA) of the asset shall be deemed to be the cost for which the previous owner acquired it, and the period of holding of the asset shall include the period for which it was held by the previous owner.
Accordingly, in your case, the COA of the Singapore property would be determined based on the cost at which your father acquired the property, and the period of holding would include the period for which your father held the property.
Old property
Since your father acquired the property around 35 years ago, i.e., before 1 April 2001, you would have the option to adopt either the actual COA to your father or the fair market value (FMV) of the property as on 1 April 2001 as your 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.
Further, since the property was acquired before 23 July 2024 by your father, the grandfathering provision applicable to a resident taxpayer would apply. Accordingly, you 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.
Foreign currency
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.
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.
Therefore, Indian tax may become an actual tax outflow for you unless you opt for the tax exemption available upon reinvestment in a qualifying asset in India.
Harshal Bhuta is a partner at P. R. Bhuta Chartered Accountants
