Inheriting property in India — the NRI and OCI handbook

India has no inheritance tax — the Estate Duty Act, 1953 was abolished in 1985 and nothing has replaced it. For an NRI or OCI taking an Indian property across a succession, the hard questions are not about Indian estate tax; they are about:

Whether the inheritance itself is permitted under FEMA.
Which personal law governs succession.
Whether probate or a succession certificate is needed.
How to get the property mutated and the title rebuilt in the heir's name.
What happens on eventual sale — cost base, holding period, capital gains, TDS, and repatriation.
Whether the decedent's foreign estate taxes (US, UK) apply.

This page works through each of those.

Who can inherit Indian immovable property

Anyone. The RBI's Master Direction on Acquisition and Transfer of Immovable Property in India permits inheritance by:

Indian residents — straightforward.
NRIs (Indian citizens resident abroad) — permitted, including agricultural land, plantation property, and farmhouses.
OCI and PIO cardholders — same footing as NRIs.
Foreign nationals with no Indian connection — permitted without RBI approval, with two caveats (below).

Two conditions sit behind the headline:

The property must have been acquired by the decedent in compliance with the FEMA / FERA rules in force at the time. If the decedent was a non-resident who bought the property in breach of then-applicable exchange-control law, the title was defective at source and cannot be passed on cleanly.
Restricted-country list. Citizens of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal, Bhutan, Hong Kong, Macau, and the Democratic People's Republic of Korea (North Korea) need prior RBI approval to acquire immovable property in India by inheritance. The application runs through RBI's Exchange Control Department.

A foreign national who inherits despite holding a restricted- country passport should pause the mutation process and get RBI approval in hand before taking title.

Gift is not the same as inheritance

FEMA permits residents to gift residential and commercial property to NRIs / OCIs, but not agricultural land, plantation property, or a farmhouse. Those three categories can only move to an NRI by inheritance (or by the NRI being resident at the time of acquisition). Any attempt to convert a restricted-class gift into an "inheritance" by post-dated documents invites both Indian tax and FEMA exposure.

For the farmland position, see agricultural land in India.

Which personal law governs succession

Indian succession is a personal law matter, not a single statute. The rule that applies depends on the decedent's religion:

Hindu, Sikh, Jain, Buddhist — Hindu Succession Act, 1956 (as amended in 2005 to give daughters coparcenary rights on the same footing as sons).
Muslim — Muslim Personal Law (Shariat) Application Act, 1937; Sunni or Shia rules as applicable.
Christian, Parsi, and persons not covered above — Indian Succession Act, 1925.
Anyone with a valid will — the Indian Succession Act, 1925 governs testamentary succession across religions (with a carve-out for Muslim testators, who can freely will only up to one-third of their estate).

The NRI heir's foreign citizenship does not change which personal law governs — that is determined by the decedent's law, not the heir's.

Testamentary vs intestate succession

With a will. The will names the heirs and shares. It must be proved — in most cases by probate. Probate is mandatory for wills made by a Hindu, Christian, Parsi, Jain, Sikh or Buddhist if the will was executed within or relates to property in the jurisdictions of Mumbai, Chennai, or Kolkata (the old "Presidency towns"). Elsewhere, probate is optional but commonly taken for evidentiary weight.

Without a will (intestate). The applicable personal law's intestacy rules determine shares. For a Hindu male, the Class I heirs (spouse, children, mother, and specified descendants of predeceased children) take in equal shares. For a Muslim, the Quranic shares of sharers and residuaries apply. For a Christian, the Indian Succession Act's widow-and-children formula applies.

Probate, letters of administration, succession certificate

These three are different instruments:

Probate — court order confirming the validity of the will and the executor's authority. Issued by the District Court (or High Court in original jurisdiction).
Letters of Administration (LoA) — issued when there is a will but no named/willing executor, or where probate is not sought, or on intestacy to formalise an administrator.
Succession Certificate — issued under the Indian Succession Act for movable assets and debts (bank balances, shares, provident fund, insurance proceeds). It is not a title document for immovable property, though banks and depositories require it.

Many NRI heirs mistakenly apply for a succession certificate thinking it will transfer a flat or a plot. It will not. For immovable property without probate/LoA, the path is mutation on strength of the will and indemnity/surety, or a court- ordered succession decree.

Mutation — the step NRIs most often delay

Mutation is the entry of the new owner's name in the municipal / revenue records (khata, patta, 7-12 extract, depending on the state). It is administrative, not title- confirming — but without it, property tax bills stay in the decedent's name, utility transfers stall, and future sale becomes harder.

Papers typically required:

Death certificate of the decedent.
Will and probate, or succession/heirship documents.
NOC / affidavit of no-objection from other legal heirs.
Identity and address proof of the applicant.
Latest property tax receipts.
Indemnity bond in many states.

For NRIs, mutation is usually handled through a specific Power of Attorney to a family member or lawyer in India. Keep the PoA narrowly scoped (mutation + utilities + society records; not sale). See mutation mechanics in property registration in India.

Delay is expensive. A property sitting unmutated for years often collects dues, disputes with tenants or neighbours, or family members who quietly assert possession. File the mutation within the state-prescribed window (commonly 90 days) and keep it moving.

What the NRI heir can do with inherited property

Hold. No requirement to sell within any time frame. FEMA permits an NRI to continue holding inherited property of any category — residential, commercial, agricultural, plantation, farmhouse — indefinitely.

Rent out. Residential and commercial lets are permitted and the rent is taxable in India. The tenant (for rents above the TDS threshold) must deduct TDS under Section 194-I or Section 195 (if the landlord is an NRI). Rent can be credited to NRO and repatriated within the USD 1 million per FY window.

Sell. Residential and commercial property can be sold to any eligible buyer. Agricultural land, plantation property, and farmhouses can only be sold to persons resident in India who are eligible under that state's land-reform and ceiling laws.

Gift or bequeath further. The NRI can execute a fresh will over the inherited property. Gifting agricultural land to another NRI remains prohibited under FEMA — that restriction doesn't relax on the second generation.

No Indian inheritance tax — but watch the foreign side

India: No estate duty, no inheritance tax, since 1985. The heir pays no tax simply on receiving the property.
United States: US citizens and green card holders are subject to US estate tax on worldwide assets (including Indian property) above the federal exemption. The US heir receiving an Indian inheritance from a non-US decedent is usually not subject to US estate tax on that specific inheritance, but Form 3520 reporting is required above the US$100,000 threshold.
United Kingdom: UK-domiciled decedents' worldwide estates (including Indian property) are within UK Inheritance Tax scope at 40% above the nil-rate band.
Canada: No estate tax, but a deemed disposition at fair market value on death — capital gains on the decedent's Indian property are taxable on the Canadian final return.
Australia: No estate tax, but a pre-CGT / cost base step-up regime that affects the heir's eventual sale.

Check the domicile/residence position of the decedent and the heir in both countries. Coordination with a foreign tax advisor usually matters more than Indian tax on the inheritance itself.

Capital gains when the NRI eventually sells

The inherited property's tax mechanics roll back to the previous owner:

Cost of acquisition = the cost to the previous owner who actually purchased the property (not the market value on the date of death).
Holding period for the short-term / long-term test includes the previous owner's holding period.
Improvements made by either the previous owner or the current heir (post-1 April 2001) are deductible.
Date of acquisition for indexation — historically allowed from the previous owner's date under CIT v. Manjula J. Shah (Bombay HC, 2011) and similar rulings; tread carefully and document the position.

For sales on or after 23 July 2024, long-term gains on land or building are taxed at 12.5% without indexation as the default. The resident grandfathering option (20% with indexation) does not extend to NRI heirs. On a pre-2001 acquisition by the decedent, the FMV-as-on-1-April-2001 substitution under Section 55(2)(b) is available in principle but irrelevant to an NRI's own computation — see capital gains on property acquired before 2001.

For the full computation framework, see how to calculate capital gains.

TDS on sale of inherited property

When an NRI sells Indian property, Section 195 applies: the buyer must withhold TDS at the applicable capital-gains rate (12.5% plus surcharge and cess on the gross sale consideration by default). To avoid a large cash blockage, the NRI seller should apply for a Section 197 lower- deduction certificate (Form 13) before executing the sale deed, declaring the actual gain and paying TDS only on that.

Inheritance does not change the TDS rate. What matters is the current seller's residential status and the holding period (which includes the previous owner's).

Repatriation of sale proceeds

Sale proceeds of inherited property can be repatriated up to USD 1 million per financial year, net of Indian taxes.
Route: the sale proceeds credit to the heir's NRO account (not NRE), and move abroad via Form 15CA + Form 15CB (CA certification of tax compliance).
There is no restriction on the number of properties whose proceeds are aggregated — the cap is on the dollar amount per FY.
Where multiple legal heirs have sold simultaneously, each heir has their own USD 1 million cap per FY.

See selling property as an NRI for the full repatriation mechanics.

Common pitfalls

Delay in mutation. Tax bills pile up, encroachment risk grows, and some states start charging penal mutation fees after the prescribed window.
Missing legal heirs. A cousin or estranged sibling's signature turns out to be needed years later. Get the complete heirship established at the outset.
Relying on a succession certificate for immovable property. It does not transfer real estate title.
Ignoring the restricted-country rule. A foreign heir from Pakistan/China/etc. can inherit but needs RBI approval — getting title mutated without approval is a FEMA violation waiting to surface on resale.
Not updating the will to reflect the inheritance. Heirs themselves often do not have a fresh will covering the Indian asset, recreating the same problem for the next generation.
Undervaluing cost base on eventual sale. Reconstruct the previous owner's actual cost and improvements; don't default to zero.
Benami claims. A resident relative who held the property "for" the NRI during the decedent's lifetime may assert beneficial ownership on the estate. Benami structures are illegal under the 1988 Act; inheritance from a benamidar is not a clean way to take title.

Checklist for an NRI inheriting Indian property

Obtain the death certificate and, if there is a will, the original. Start probate/LoA where required.
Establish the complete list of legal heirs under the applicable personal law.
For restricted-country heirs, apply for RBI approval before taking title.
Execute a specific PoA to a trusted person in India for mutation and administrative steps.
Apply for mutation in the municipal/revenue records.
Transfer utilities, property tax, society records, and update the insurance policy.
File Indian income-tax returns once rent or capital gains accrue; disclose the foreign-source death of the decedent on the residence-country return if required.
For sale: obtain the Section 197 lower-TDS certificate before execution.
Repatriate via NRO → Form 15CA + 15CB within the USD 1 million per FY window.
Update your own will to cover the Indian asset and your succession plan.

Summary

Any NRI, OCI, or foreign national can inherit Indian property; restricted-country heirs need RBI approval.
No Indian inheritance tax — but watch for US / UK / Canada / Australia estate or deemed-disposition rules.
Personal law determines succession; probate or LoA is the usual route for title clarity.
Mutation is administrative but critical — do it within the state's prescribed window.
Eventual sale runs on the previous owner's cost base and holding period; TDS under Section 195 is on gross consideration unless a Section 197 certificate is in hand.
Repatriation is via NRO with the USD 1 million per FY cap and Form 15CA/15CB.