Inherited Indian Property & US Tax: Basis, Form 3520 & Selling
Inheriting Indian property isn't taxable in the US when you inherit it — tax enters only when you sell, driven by your cost basis. Here's the documentation to gather, the Form 3520 angle, and the path to repatriation.
Inheriting a flat, a house, or land in India is, for US tax purposes, not a taxable event when you inherit it. The tax questions arrive later — when the property earns rent, and especially when you sell — and they turn on your cost basis and the capital gain. Before any of that, the job is documentation: proving you inherited it and establishing the value.
Educational only — confirm with CPA / CA
- This is general information, not US or India tax, or legal advice. Inheritance, basis, and capital-gains rules change and depend on your facts.
- Confirm with a cross-border CPA and a CA, and verify on the IRS and the Income Tax portal.
The short version
- Inheriting Indian property is not taxable income to you in the US.
- A bequest from a foreign individual/estate over $100,000 is reported on Form 3520 (disclosure, not tax).
- Tax comes later — on rent and on the capital gain when you sell.
- Your cost basis and the documentation behind it are everything.
When is it taxed?
- At inheritance — generally not taxable to you in the US (report on Form 3520 if over the threshold)
- While you hold it — rental income is taxable and reportable in both countries
- When you sell — capital gains tax in India, and reported on your US return (with foreign tax credit relief for India tax via the DTAA)
Documentation to establish inheritance and basis
Gather these early
- Death certificate of the owner
- Will / probate or, if intestate, succession certificate / documents
- Legal heir certificate establishing you as a lawful heir
- Property title and the chain of ownership
- Original purchase deed and cost records
- A valuation report near the date of inheritance
Why the valuation matters
- Your eventual capital gain depends on the cost basis. The original cost, improvements, and an inheritance-date valuation all feed it — under each country's own rules.
- Chasing these documents from the US after a sale is painful. Get a valuation and collect the title chain now.
Selling and bringing the money to the US
When you sell, you compute the gain, the buyer typically deducts TDS, and you may file an Indian return to reconcile. To move proceeds to the US you'll need the repatriation paperwork.
Don't re-run the math here
- For the numbers, use the India property capital-gains calculator.
- For the document/FEMA workflow to move the money, see repatriating property-sale proceeds and the Form 15CA / 15CB checklist.
- High TDS on the full sale price is often refundable — see the NRI TDS refund guide.
Form 3520 on the inheritance
A bequest from a foreign individual or estate over US $100,000 in the year is generally reported on Form 3520. It's a disclosure, not a tax — but the penalty for missing it is real.
Questions to ask
For your CPA and CA
- What's my cost basis for an eventual sale — under US and Indian rules?
- Does this bequest trigger Form 3520 this year?
- While I hold it, how is rental income taxed and credited across both countries?
- When I sell, how do TDS, the DTAA, and repatriation fit together?
Check the reporting on your inheritance
Map who you inherited from, what it was, and the value — and get a Form 3520 / FBAR / PFIC review flag and a document list.
- Back to the hub: Money from parents: gifts, inheritance & Form 3520
- Siblings: Gift from parents to USA · Inherited Indian mutual funds & PFIC · Form 3520 checklist
- Related: Inheriting Indian assets & US tax · Repatriating property-sale proceeds · Property capital-gains calculator
Frequently asked questions
Do I pay US tax when I inherit property in India?
No. Inheriting Indian property is not a taxable event for you in the US. Tax comes later — on rental income while you hold it and on the capital gain when you sell. A bequest from a foreign individual or estate over $100,000 is reported on Form 3520.
What is my cost basis in inherited Indian property?
Your basis determines the capital gain when you sell, and the US and India compute it under their own rules — drawing on the original cost, improvements, and a valuation around the date of inheritance. Get a dated valuation report and keep the title chain; confirm the treatment with a cross-border CPA and a CA.
How do I bring the sale proceeds of inherited property to the US?
After settling Indian capital-gains tax and TDS, you assemble source documents and use the Form 15CA/15CB repatriation route, subject to the FEMA limit. The high TDS withheld on the sale price is often refundable when you file an Indian return. See the repatriation and TDS-refund guides.
Do I report inherited Indian property on FBAR or FATCA?
Real estate held directly is generally not an FBAR or FATCA account item by itself, but the Indian bank accounts the rent or sale proceeds flow into are. Once you sell or rent, the cash and accounts can trigger FBAR/FATCA. Confirm your specific reporting with a CPA.