When an NRI in Australia sells inherited property in India, the buyer must deduct TDS under Section 195 of the Income Tax Act — generally at 20% plus applicable surcharge and cess on long-term capital gains, higher than the 1% TDS resident sellers face under Section 194-IA — and the NRI can repatriate the net sale proceeds abroad, up to USD 1 million (or equivalent) per financial year, from an NRO account, subject to Form 15CA/15CB certification by a chartered accountant.
How capital gains are calculated on inherited property
Under Section 49 of the Income Tax Act, the cost of acquisition for inherited property carries over
from the original owner rather than resetting to the property's value on the date of inheritance, and the
holding period counts from the original owner's date of acquisition — so most inherited-property sales
qualify for long-term capital gains treatment, with indexation benefit available where applicable.
TDS under Section 195 — why it's higher than for resident sellers
Section 194-IA's 1% TDS applies only to resident sellers. For a non-resident seller, the buyer must
instead deduct TDS under Section 195 on the full sale consideration at the capital-gains rate, unless a
lower-deduction certificate has been obtained — worth clarifying with the buyer's advisor before the
transaction closes.
Getting a lower or nil TDS certificate (Form 13 / Section 197)
An NRI seller can apply to the jurisdictional Assessing Officer, via Form 13 under Section 197, for a
certificate authorizing TDS at a lower or nil rate based on the actual computed gain — worth evaluating
with a chartered accountant before the sale closes.
Repatriation of sale proceeds via FEMA
Net sale proceeds are typically credited to the NRI's NRO account in India. FEMA rules permit
repatriation abroad of up to USD 1 million (or equivalent) per financial year, cumulative across eligible
remittances from that account, subject to the authorized dealer bank receiving Form 15CA (and Form 15CB
where applicable).
Claiming relief against double taxation in Australia
Because the gain is generally also reportable to the Australian Taxation Office, the India-Australia
Double Taxation Avoidance Agreement allows the NRI to claim a foreign income tax offset in Australia for
tax already paid in India on the same gain, subject to Australian tax rules — this is an Australian tax
filing matter best handled with an Australian tax professional alongside the Indian-side computation.
Common mistakes in this process
- Assuming the resident 1% TDS rate applies once the seller has become an NRI.
- Not applying for the Section 197 lower-deduction certificate before the sale closes.
- Leaving Form 15CA/15CB paperwork until after proceeds reach the NRO account.
- Using the property's value on the date of inheritance as the cost basis instead of the original
owner's carried-over acquisition cost.
