Selling Inherited Property in India as an NRI in Mauritius -- TDS, Capital Gains & Repatriation

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 Mauritius as it would be for one based anywhere else -- the India- Mauritius DTAA's well-known capital gains provisions for listed shares (see this platform's Tax guide for Mauritius) are a separate matter from the taxation of a straightforward inherited real-estate sale.

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 Mauritius 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 -- distinct from Mauritius's own financial regulation

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 is an Indian-side rule and process, entirely separate from any requirements Mauritius's own Financial Services Commission or the Bank of Mauritius may impose on funds arriving into Mauritius.

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.
• Confusing India's FEMA repatriation rules (governing funds leaving India) with Mauritius's own financial regulatory requirements (governing funds arriving into Mauritius) -- the two are independent and both may need separate attention depending on what happens to the funds next.