Repatriating Sale Proceeds of Inherited Property: The FEMA and RBI Approval Trail
Selling inherited Indian property is usually the easy part — moving the money abroad afterward is where the actual FEMA compliance work sits, involving a specific annual repatriation ceiling and a tax-clearance paper trail that has to be assembled before the bank will process the transfer.
The USD 1 million facility
An NRI (and, under specific conditions, certain other categories of persons) can remit up to USD 1 million per financial year out of balances in an NRO account — which includes sale proceeds of inherited immovable property, among other permitted sources — through an Authorised Dealer bank, subject to payment of applicable taxes in India. This is the standard route used for repatriating inherited property proceeds.
What has to happen before the money moves
- Sale completion and credit to NRO account: Proceeds from the sale of inherited property are credited to the NRI's NRO account (not NRE, since the property itself was not originally acquired with foreign exchange in most inheritance scenarios).
- Capital gains tax computation and payment: The applicable capital gains tax (long-term or short-term, depending on the holding period counted from the original owner's acquisition date for inherited assets, not the date of inheritance) must be computed and the tax liability settled — including any TDS the buyer was required to deduct at the point of sale.
- Chartered Accountant certification — Form 15CB: A CA certifies the nature of the remittance and confirms applicable taxes have been paid or provided for.
- Form 15CA filing: The remitter (or their representative) files Form 15CA online, which the bank requires before processing the outward remittance.
- Bank documentation: The Authorised Dealer bank will typically also want the sale deed, proof of inheritance, and the source documentation establishing how the funds in the NRO account arose from this specific transaction.
Why the holding period matters for tax, not for eligibility
For inherited property, the capital gains holding period is computed from when the original owner first acquired the property, not from the date of inheritance — this usually means inherited property held by a family for decades qualifies for long-term capital gains treatment even if the NRI heir has owned it personally for only a short time. This affects the tax rate and available indexation/exemption benefits, which in turn affects how much net proceeds remain available to repatriate.
Common documentation gaps that delay the remittance
- Missing or incomplete succession documentation (will, succession certificate, or legal heir certificate) linking the NRI to the original owner.
- TDS certificates from the buyer (under Section 195, since the seller is an NRI) not yet reconciled with Form 26AS/AIS before the CA issues Form 15CB.
- Bank account mismatch — sale proceeds credited to an account that is not properly designated as NRO, requiring correction before the repatriation application can proceed cleanly.