When an NRI in Kuwait 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. Kuwait does not levy personal income tax on individuals, and the NRI can still repatriate net proceeds abroad, up to USD 1 million (or equivalent) per financial year, from an NRO account, subject to Form 15CA/15CB certification.
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 Kuwait as it would be for one
based anywhere else.
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 Kuwait 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 Kuwait bank account
as it is for any other destination country.
Why there is generally no double-taxation relief needed on the Kuwait side
Kuwait does not levy personal income tax on individuals, so there is generally no Kuwait-side tax on
this capital gain to seek relief against -- unlike an NRI in Germany or New Zealand, who typically
needs to claim foreign tax credit relief against home-country tax on the same gain. This does not
reduce the Indian tax or TDS obligation in any way. An NRI in Kuwait who also holds other tax residency
ties should separately confirm their reporting obligations in that other jurisdiction.
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.
- Assuming Kuwait's tax treatment eliminates all foreign reporting obligations, without checking
other citizenship/residency ties that may still require disclosure elsewhere.
