What is tax-free, and what is taxed later
India has no inheritance tax. Money or property received under a will or by inheritance is excluded from the receipt-tax rule (Section 92(3)(c), formerly Section 56(2)(x)).
| Event | Indian tax treatment |
|---|---|
| Receive the flat or bank balance | No income tax on the inheritance itself |
| Earn rent after inheriting | Your income for your ownership share; apply house-property deductions |
| Earn interest after receiving the money | Your income, taxed as a resident's interest; the bank deducts resident TDS once the deposit is in your name |
| Sell the flat later | Capital gain using the previous owner's cost and holding period |
A valuation at death does not reset your purchase cost. For qualifying resident individuals with land or buildings acquired before 23 July 2024, compare the 12.5% calculation with the protected 20% indexed calculation under Section 197(3) of the 2025 Act, formerly Section 112 of the 1961 Act. If an executor is still administering the estate, its income can require separate assessment before distribution.
Where the NRE, NRO and FCNR(B) money goes
Tell the bank about the death and request its deceased-depositor claim pack. A resident heir can receive the money; inheriting it does not make you eligible to hold an NRI account.
| Deceased's account | Resident claimant's route |
|---|---|
| NRO | Settle the entitlement into a resident account in India |
| NRE savings | Resident rupee payout after the bank settles the claim |
| NRE term deposit | At maturity it is treated as a domestic rupee term deposit; later interest follows domestic deposit rates |
| FCNR(B) term deposit | Resident claimant's maturity proceeds convert to rupees on the maturity date; later interest follows domestic term-deposit rates |
Ask the bank to distinguish a claim before maturity from one at or after maturity. Do not assume the NRI deposit rate or tax exemption transfers to you. The account-by-account inheritance page covers the wider estate and repatriation questions.
Which paper answers which asset
Start with the bank's claim form, death certificate, claimant identity/address proof, account details and nomination or survivorship record. A nominee receives for the entitled heirs; nomination alone does not settle ownership.
| Paper | What it answers |
|---|---|
| Death certificate | Confirms the death for the bank, tax portal and property file |
| Legal-heir or surviving-family certificate | Supports the family relationship and administrative mutation request |
| Succession certificate | Authorises collection of specified debts and securities, not title to a flat |
| Will and any probate or administration grant | Establishes the testamentary claim and authority where a court grant is needed |
For a flat, assemble the earlier registered deed, succession papers and any release or partition deed. Ask the local revenue office and sub-registrar for the checklist for the actual mutation or registered instrument. Probate is not automatically mandatory under the old presidency-town rule: Section 213 was omitted in 2025.
Use the document comparison and succession-certificate process. For investments, use share and mutual-fund transmission.
Finish the deceased's return under their PAN
Report income up to death in the deceased's return, through the legal representative. Report subsequent income belonging to you in your own return; keep executor-administered estate income separate where that rule applies. Death does not erase a pending return, tax demand or refund.
Log in with your own account on the e-filing portal. Open Authorised Partners, then Register as representative assessee, create a request and select Deceased (legal heir). Upload the deceased's PAN, death certificate and accepted legal-heir proof. After approval, switch to the representative profile. The legal-heir registration page covers the supporting evidence.
The legal-representative provision is Section 302, formerly Section 159. FY 2025-26 income stays under the 1961 Act and old return forms even when filed in 2026; FY 2026-27 uses the 2025 Act. Retain the deceased's bank interest statements, rent records, tax credits and earlier returns.
A worked example: Anjali in Kochi
Anjali inherits her father's Bengaluru flat, bought in 2009 for Rs 40 lakh and now worth Rs 1.60 crore, plus Rs 22 lakh in NRO. She pays Rs 0 on receipt of those assets. This does not cancel her father's unpaid tax or tax on later rent and interest.
Suppose she sells in FY 2027-28 for Rs 1.60 crore. Assume today's law continues, no selling costs, improvements, losses or reinvestment relief, and other income has used her basic exemption.
| Calculation | Amount |
|---|---|
| Sale less inherited cost | Rs 1.60 crore - Rs 40 lakh = Rs 1.20 crore |
| Base tax at 12.5% | Rs 15 lakh |
| With 15% surcharge and 4% cess | Rs 17.94 lakh |
| Resident-seller TDS at 1%, if stamp value is no higher | Rs 1.60 lakh credited towards tax |
Rs 17.94 lakh is the 12.5% computation, not an unconditional future bill. Check eligibility for the resident indexed-tax protection and the sale year's notified index before finalising; assume total income remains below Rs 2 crore. The tax belongs to Anjali because she is the seller, even though her father was NRI.
If the heir also lives abroad
The Indian inheritance exclusion still applies. What changes is the receiving account, tax on later Indian income and the route for taking money abroad.
| Heir | Account and later sale |
|---|---|
| Resident | Resident-account settlement; later sale uses resident-seller TDS |
| NRI | Bank checks NRE/FCNR(B) repatriable entitlement separately from NRO funds; later sale uses non-resident TDS |
Do not send an NRI heir's share through a resident sibling's account merely for convenience. Ask the bank to identify the permitted account and remittance route for that heir. An NRI seller does not get the resident-only indexed-tax protection. The buyer's NRI-sale checklist explains the deduction that their eventual buyer must make.