Is redemption of inherited funds taxed?

My deceased mom was a non-resident Indian (NRI) and through her work overseas, she invested $20000 in a fund falling within the Isles of Man in 2002. This was invested from the funds earned overseas from her overseas checking account. She then retired in 2016 and didn’t redeem her funds and he or she turned a resident Indian. Now the fund has appreciated to $50000. If I, being a resident Indian, should redeem this and convey it to India, what shall be my taxation? I’m a tax payer and fall within the 30% bracket.

—Name withheld on request

Inheritance of overseas property below a will will not be a taxable occasion whereas the sale of such property by the authorized inheritor would appeal to capital positive aspects tax within the palms of the authorized inheritor.

The funding within the Isle of Man fund could be thought of as a long-term capital asset and whereas computing the overall holding interval of the capital asset, the interval of holding by your deceased mom can be to be included. Similarly, the price of acquisition paid by your deceased mom could be handled as price of acquisition in your palms too. Capital positive aspects arising from the sale of this funding could be computed by deducting the listed price of acquisition from the total worth of consideration that might be obtained.

As per judicial precedents, indexation ought to be out there from the 12 months 2002 (assuming fiscal 12 months 2002-03) until the fiscal 12 months 2023-24 i.e. interval beginning with the date when the asset was acquired by your deceased mom until the date of sale. The listed price of acquisition involves $66,286 ($20,000 / 105 * 348). Since the listed price of acquisition is increased than the sale worth, it will lead to a capital lack of $16,286, which you’ll convert into Indian rupees on the SBI shopping for TT (Telegraphic Transfer) price prevalent on the final of earlier month of sale. TT price is the speed at which a financial institution will convert overseas foreign money despatched to India, into Indian rupee.

The capital loss may be set-off towards some other long-term capital positive aspects arising throughout FY2023-24 and pending set-off, it may be carried ahead for subsequent 8 years to be set-off towards any future long-term capital positive aspects.

Harshal Bhuta is companion at P.R. Bhuta & Co. Chartered Accountants

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Updated: 09 Oct 2023, 09:10 PM IST

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