When an NRI in South Africa 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. Relief against double taxation is available under the India-South Africa DTAA (signed 1996, amended by a 2013/2014 protocol) if the gain is also relevant to South African tax, and the NRI can repatriate net proceeds abroad, up to USD 1 million (or equivalent) per financial year, from an NRO account, subject to Form 15CA/15CB certification -- separate from, and not limited by, South Africa's own exchange control rules on money entering the country.
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 South Africa 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 South Africa 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 South Africa's own exchange controls
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
South Africa's own SARB exchange control regime, which governs funds moving out of South Africa, not
funds arriving into a South African bank account from India.
Relief under the India-South Africa DTAA
India and South Africa's tax treaty, signed 4 December 1996 and later amended by a protocol in
force from 26 November 2014, provides the framework for relief against double taxation where the same
gain could otherwise be taxed in both countries. The exact treatment depends on the NRI's South
African tax residency status under SARS's own residency tests (see this platform's Tax section) --
confirm current treatment with a cross-border tax advisor familiar with both jurisdictions before the
sale closes.
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 South Africa's
own exchange control rules (governing funds leaving South Africa) -- the two are independent and
both may need separate attention depending on what happens to the funds next.
