Chartered Accountant · ICAI M.No. 153926 · FRN 136869W
How the gain is worked out
The taxable gain is the sale price less the cost — and the cost is what your parents paid, not the value when you inherited it. If they bought the property before 1 April 2001, you may instead use its fair market value as on 1 April 2001, which is usually higher and so reduces the gain. Because the holding period includes your parents’ ownership, the gain is nearly always long-term, taxed at 12.5% plus surcharge and cess (from 23 July 2024, without indexation). Inheriting itself was not taxed.
The TDS layer
As with any NRI property sale, the buyer must deduct TDS under Section 195 on the full sale value, which is far more than the tax on your gain. You can avoid that cash being blocked by applying in advance for a Section 197 lower certificate, so the buyer deducts only on the gain. Confirm current rates and surcharge for your sale.
A worked example
Example: your parents bought a flat in 1998 for ₹6 lakh; its 1 April 2001 fair value was ₹12 lakh; you sell in 2026 for ₹1.1 crore. Your gain is roughly ₹1.1 crore minus ₹12 lakh, taxed at 12.5% — around ₹12 lakh, before any reinvestment relief. Reinvesting under Section 54 or 54EC can cut this sharply. Keep your parents’ purchase deed safe, as it anchors the cost. Our NRI property service can compute and plan the sale.