Inheritance Tax in India for NRIs: US Reporting Rules

You’ve inherited a flat in Mumbai, gold jewellery, shares or money in an Indian bank account. Your family says India doesn’t charge inheritance tax. But you’re living in the United States, and you’re wondering whether the IRS expects a share.

The answer depends on two separate tax systems — India’s and the US’s — and they don’t treat inheritance the same way.

India generally doesn’t tax you for receiving an inheritance. The US usually doesn’t tax inherited property as income either, but reporting is compulsory above a dollar threshold, covered below.

This guide explains inheritance tax in India for NRIs — specifically US-based NRIs, including US citizens, green-card holders and other US tax residents. It covers what happens when you inherit, what to report to the IRS and how taxes work when you eventually sell or transfer the assets.

Does India Charge Inheritance Tax?

No. India abolished Estate Duty in 1985 and has no NRI inheritance tax or replacement estate tax since.

Under India’s income-tax rules, money or property received through inheritance or a will is generally excluded from taxation under the gift provisions. You don’t pay income tax simply because you’ve become the owner.

The rule also applies to someone living overseas. An NRI inheriting a flat from a parent in India generally isn’t taxed on receiving it.

However, tax-free inheritance doesn’t mean the asset stays tax-free.

If you rent out the flat, the rental income may be taxable. Interest from an inherited bank account and dividends from inherited shares may also create taxable income.

Selling inherited property, shares, or gold can result in capital gains tax.

The important distinction is between receiving an asset, earning income from it and selling it. Each has different tax consequences.

What US-Based NRIs Actually Owe (the US Side)

India’s inheritance-tax position is straightforward; the harder question is inherited property tax for NRIs in the US. Your US obligations depend on your tax status, the deceased person’s circumstances, the inheritance’s value and what happens to the assets afterwards.

Does US Estate Tax Apply to Indian Inherited Assets?

US estate tax generally concerns the deceased person’s estate, rather than an income-tax bill automatically imposed on someone receiving an inheritance.

Whether Indian assets fall within US estate tax depends primarily on the deceased person’s citizenship and domicile.

If the deceased was a US citizen or domiciled in the US for estate-tax purposes, their worldwide estate generally falls within the US estate-tax system. That can include Indian property, bank deposits, gold and investments.

For deaths in 2026, the federal basic exclusion amount is $15 million. Whether a return or tax payment is required depends on the estate’s value, prior taxable gifts, deductions and other circumstances.

If the deceased was neither a US citizen nor US-domiciled, US estate tax generally applies only to US-situated assets. Indian real estate ordinarily falls outside that scope.

A green card doesn’t automatically settle the domicile question for estate-tax purposes. The person’s permanent-home intentions and circumstances matter.

For an heir living in the US, the first step is to establish the deceased person’s citizenship, domicile and asset ownership.

The IRS estate-tax instructions explain the 2026 exclusion and filing rules.

Do I need to report a foreign inheritance to the IRS? (Form 3520)

Yes, potentially, even if receiving the inheritance creates no US income-tax bill.

If you’re a US person and receive more than $100,000 in a tax year from a nonresident alien individual or foreign estate, you generally must report the qualifying gifts or bequests on Form 3520.

The threshold includes amounts from related foreign persons that must be aggregated.

For example, suppose you inherit a flat worth $180,000 outright from a parent who was neither a US citizen nor a US resident. The inheritance generally isn’t taxable income, but it ordinarily triggers Form 3520 reporting.

Here’s what to do:

1. Establish when you received the inheritance and document its value in US dollars.
2. Confirm the deceased person’s status and whether the receipt falls under the foreign-gift reporting rules.
3. Add reportable gifts or bequests from related foreign persons during the year.
4. Complete Part IV of Form 3520 when the threshold is exceeded.
5. File the form separately from your income-tax return by the applicable deadline.

Form 3520 is an information return, not a form used to pay inheritance tax.

If you fail to report a qualifying foreign gift or bequest, penalties may reach 5% of the unreported amount per month, capped at 25%. Reasonable-cause relief may be available if you can show the late filing wasn’t due to willful neglect.

Foreign-trust distributions follow different reporting rules. Don’t assume the $100,000 threshold applies to every inheritance arrangement. Check the IRS guidance on gifts and inheritances from foreign persons.

Inherited Indian bank accounts & investments: FBAR and FATCA

Receiving an inheritance is one issue. Keeping the inherited money in India creates separate reporting obligations.

FBAR: If the combined value of your reportable foreign financial accounts exceeds $10,000 at any time during a calendar year, you generally must file FinCEN Form 114.

An inherited NRO account, savings account or Indian brokerage account may count. The threshold applies to your relevant foreign accounts combined.

FATCA: Form 8938 may also apply if your specified foreign financial assets exceed the applicable threshold.

For taxpayers living in the US, common thresholds are:

• Single: More than $50,000 at year-end or $75,000 at any point.
• Married filing jointly: More than $100,000 at year-end or $150,000 at any point.

Other filing statuses and people living abroad have different thresholds.

Directly owned Indian real estate generally isn’t itself reported on FBAR or Form 8938. Indian bank and investment accounts are different.

Form 3520, FBAR and Form 8938 serve separate purposes. Filing one doesn’t automatically satisfy the others.

The Capital-Gains Trap When You Sell

An inheritance can be tax-free when you receive it but produce different taxable gains when you sell.

India generally uses the previous owner’s acquisition cost. Under its inherited-property rules, you usually take over the original owner’s cost, subject to permitted adjustments.

If the previous owner acquired the asset before April 1, 2001, Indian rules may allow the fair-market value on that date instead of the original cost, subject to conditions.

The US generally uses the asset’s fair-market value on the date of death as its inherited tax basis, with certain exceptions.

Consider an illustrative inherited flat:

• The original owner bought it for ₹20 lakh.
• Its value at death was ₹90 lakh.
• You later sold it for ₹1 crore.

Assuming the property was purchased after April 1, 2001, and ignoring permitted costs and adjustments, India’s calculation may produce a gain of ₹80 lakh.

Using the same simplified rupee values, the difference between the date-of-death value and sale proceeds is ₹10 lakh.

But that ₹10 lakh isn’t automatically your US taxable gain.

For US purposes, the inherited basis and sale proceeds must be determined in US dollars using the appropriate exchange rates. Currency movements between inheritance and sale can change the gain, even when the rupee values remain straightforward.

For Indian long-term property sales from July 23, 2024, the general capital-gains rate is 12.5% without indexation, subject to applicable rules, surcharge and cess. Certain grandfathering relief available to resident individuals and HUFs doesn’t generally extend to NRI sellers.

An NRI property sale may also trigger tax withholding under Section 195. Withholding is often calculated on the gross sale price, which can exceed your actual tax liability — you (or your CA) need to apply for a lower-deduction certificate or file for a refund to recover the excess.

A US foreign tax credit may reduce overlapping taxation, but the different gain calculations mean it may not eliminate every tax difference.

Keep the original purchase deed, improvement expenses, date-of-death valuation, exchange-rate records, sale deed and Indian tax certificates. You’ll need these to support both countries’ calculations.

Getting the Money to the US: Repatriation

After selling inherited property, the proceeds often move through an Indian NRO account before being sent overseas.

Under RBI’s remittance-of-assets rules, eligible NRIs and OCIs can generally remit up to US$1 million per Indian financial year, subject to applicable conditions.

Your authorised dealer bank may request proof of inheritance, the sale deed, tax documents and other declarations before releasing the money.

Older guidance refers to Forms 15CA and 15CB. Under India’s newer income-tax framework, corresponding reporting requirements may use Forms 145 and 146 for applicable remittances from April 2026.

The required documentation depends on the payment date, tax treatment and transaction.A CA certificate (Form 146) isn’t required for every transfer — which transfers need it depends on the amount and type; confirm with your bank before assuming you can skip it.

Check the RBI remittance-of-assets guidance and confirm the applicable forms with your bank.

Transferring money you already own to your US account isn’t itself another taxable inheritance or capital-gains transaction.

However, the property sale, any income earned and your foreign-account reporting obligations still need to be addressed.

Who Can Inherit: Indian Succession Law in Brief

Inheritance law in India depends on the deceased person’s religion, applicable personal law, whether a valid will exists and the property’s circumstances.

The Hindu Succession Act generally governs intestate succession for Hindus, Sikhs, Jains and Buddhists.

Muslim succession follows applicable Muslim personal law, including specific rules affecting inheritance shares and wills.

The Indian Succession Act, 1925, governs several other succession matters, including important rules applying to Christians, Parsis and testamentary succession, subject to exceptions.

NRIs and OCIs can generally inherit Indian immovable property, including certain agricultural land that they couldn’t ordinarily purchase. However, selling inherited agricultural land is subject to FEMA restrictions and generally requires an eligible resident buyer.

The documents needed depend on the asset.

A will or probate may establish rights under a deceased person’s estate. A legal-heir certificate can identify surviving heirs. A succession certificate generally concerns debts and securities; it doesn’t, by itself, establish ownership of an inherited flat.

Property mutation updates government or revenue records. It doesn’t independently create ownership.

Religion and personal law determine which succession act applies, not citizenship — so a US-citizen NRI with Hindu parents is still governed by the Hindu Succession Act.

Conclusion

India doesn’t charge inheritance tax simply because you receive an inherited asset. The US generally doesn’t tax that receipt as income either, but foreign-inheritance reporting may still be mandatory.

The bigger financial consequences often arise later: estate-tax rules affecting the deceased, Indian account reporting, rental or investment income, and capital gains when you sell.

Before filing or transferring money, gather the inheritance documents, historical purchase records, date-of-death valuation and relevant tax statements.

Because Form 3520 penalties and cross-border basis differences can be significant, consider having a qualified US-India tax adviser and Indian chartered accountant review the transaction.

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