Selling Inherited Property in India as an NRI in UK — 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 is carried over from the original owner, not reset to the property's value on the date of inheritance — and the holding period is counted from the original owner's date of acquisition. This means most inherited-property sales qualify for long-term capital gains treatment, with indexation benefit (adjusting the original cost using the Cost Inflation Index) available where applicable under the provisions in force at the time of sale.

TDS under Section 195 — why it's higher than for resident sellers

The familiar 1% TDS under Section 194-IA applies only to resident sellers. For a non-resident seller, the buyer must instead deduct TDS under Section 195 — and unless a lower-deduction certificate has been obtained (below), that TDS is calculated on the entire sale consideration at the capital-gains rate, not just 1%. Buyers unfamiliar with this distinction sometimes apply the resident rate by mistake, which exposes the buyer to interest and penalty for short deduction — worth clarifying explicitly with the buyer and their 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 deduction at a lower or nil rate based on the actual computed capital gain rather than the full sale value. This is worth evaluating with a chartered accountant before the sale closes, since obtaining it in advance avoids having to claim back excess TDS as a refund later when filing the Indian tax return.

Repatriation of sale proceeds via FEMA

Net sale proceeds are typically credited to the NRI's NRO account in India. FEMA rules then permit repatriation abroad of up to USD 1 million (or the equivalent) per financial year, cumulative across all eligible remittances from that account, subject to the authorized dealer bank receiving Form 15CA (and Form 15CB where applicable) certifying that applicable taxes have been paid or provided for. Arranging this documentation in parallel with the sale, rather than after funds have already reached the NRO account, meaningfully shortens the overall repatriation timeline.

Claiming relief against double taxation in the UK

Because the gain is generally also reportable to HM Revenue & Customs, the India-UK Double Taxation Avoidance Agreement allows relief in the UK for tax already paid in India on the same gain, subject to UK tax rules on foreign tax credits — this is a UK tax filing matter best handled with a UK tax adviser familiar with foreign property disposals, alongside the Indian-side computation.

Common mistakes in this process

• Assuming the resident 1% TDS rate applies once the seller has become an NRI — it does not; Section 195 applies instead.
• Not applying for the Section 197 lower-deduction certificate before the sale closes.
• Leaving the Form 15CA/15CB paperwork until after the proceeds have reached the NRO account, which delays repatriation.
• Using the property's value on the date of inheritance as the cost basis, instead of the original owner's carried-over acquisition cost.