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. This computation is identical for an NRI seller based in Germany as it would be for one
based anywhere else -- India's tax rules apply based on the seller's non-resident status, not their
specific country of residence.
TDS under Section 195 -- why it is 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, generally on the full sale consideration at the capital-gains
rate unless a lower-deduction certificate has been obtained.
Getting a lower or nil TDS certificate (Form 13 / Section 197)
An NRI seller in Germany 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) -- this process is the same for an NRI remitting to a German bank account
as it is for any other destination country.
Why relief under the India-Germany DTAA usually matters here
Germany taxes its tax residents on worldwide income, so a capital gain on Indian property is
typically also relevant to German tax computations for an NRI who is a German tax resident --
materially different from an NRI in a Gulf country with no personal income tax, who generally has no
home-country tax on the same gain to seek relief against. The India-Germany DTAA provides the
mechanism (usually a foreign tax credit for the Indian tax already paid) to avoid double taxation on
this gain; the exact treatment depends on the NRI's specific German tax residency status and should be
confirmed with a cross-border tax advisor familiar with both jurisdictions.
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.
- Overlooking the German-side reporting obligation on the same capital gain and not claiming
DTAA relief for the Indian tax already paid.
