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By the NRIWallah team · Last reviewed: August 2026
India abolished estate duty in 1985. That does not mean your Indian assets pass tax-free — it means the tax is charged somewhere else.
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The assumption almost everyone gets backwards. India abolished estate duty in 1985 and charges nothing when you die — so people conclude their Indian flat passes to their children tax-free. It often does not. If you are a long-term UK resident or a US citizen or green-card holder, your country of residence taxes your worldwide estate, and a property in Bangalore is part of it. The tax is charged where you live, on an asset that never left India.
Invokes the 1956 UK-India estate duty treaty. A high bar, and HMRC contests it — but worth more than any other step if it holds.
Only the gain is taxed here, so the original cost matters as much as today's value.
Home, pensions, savings, investments held locally.
If not, the spouse exemption is capped at £325,000 rather than unlimited.
A green card does not qualify. Without citizenship there is no unlimited marital deduction.
Unlocks the £175,000 residence nil rate band, which tapers above a £2m estate.
Capital gains are charged at 18% inside the basic-rate band and 24% above it.
The gift stacks on top of it as income from other sources.
Tax on your of Indian assets
— an effective , charged in , when your heirs sell.
What India charges
₹0
No estate duty since 1985
Are Indian assets in scope?
It only works if all of these hold:
Allowances = £ nil rate band + £ residence band (tapered).
A transfer to your spouse rolls over at your original cost, so nothing is due now — the whole charge is deferred to the second death.
Nothing is payable when you die. Your beneficiaries take over your original cost and pay this when they sell — so it is deferred, not forgiven.
Gifting
India — the recipient pays
Capital gains — you pay, now
Inheritance tax — only if you die too soon
Three separate charges, on two different people, under three different theories. India taxes the recipient; your country of residence taxes you, potentially twice over — and no credit runs between any of them.
You gave away worth of assets carrying a gain. substitutes market value for the price you did not charge, so the whole gain is realised on the day of the gift — , taxed at , giving payable for that tax year.
The difficulty is that the gift produced no cash. You have a tax bill and no proceeds to settle it with. Holdover relief is not available on a gift of listed shares or an investment property to an individual, so there is nothing to defer it with either.
The obvious lever: gift cash instead. Selling first and giving the proceeds costs the same capital gains tax, but you choose the tax year and you have the money in hand to pay it. Switch the toggle above to see the difference.
falls inside your annual exemption. The remaining is a potentially exempt transfer: survive seven years and it leaves your estate entirely.
The gift has first call on your £ nil rate band, so only the above it is ever taxed. Taper relief then reduces the tax on that excess:
| If you die | Taper relief | Effective rate | Tax due |
|---|---|---|---|
| After 7 years | n/a | 0% | Nothing |
This gift sits inside the nil rate band, so no inheritance tax would fall on the gift itself even if you died tomorrow — and taper relief would do nothing, because there is nothing to taper. That is the part most people have backwards. But it does consume of band your estate was going to need, so the cost reappears there instead.
And the two taxes do not talk to each other. Capital gains tax paid today is not credited against inheritance tax charged on the same gift if you die within seven years. On these numbers the worst case is of capital gains tax plus up to of inheritance tax — in total on a gift of .
The 1956 treaty does not cover lifetime transfers. Indian domicile protects your Indian assets on death but does nothing for a gift made today. If you are thinking of moving home, the departure calculator covers what follows you out of each country.
No capital gain is recognised at all. Unlike the UK, Canada and Australia, the US does not treat a gift as a disposal — you owe nothing on the of built-in gain. Instead the recipient takes over your original cost under section 1015, so the liability is handed across with the asset rather than forgiven. They pay it when they eventually sell.
On the gift tax side, the first is excluded outright. The remaining is not taxed now, but must be reported on Form 709 and permanently reduces the exemption your estate was going to rely on.
The exclusion is per recipient per year, so gifts split across several family members and several years go a long way. There is no seven-year rule to survive.
treats a gift as a disposal at market value even though no money changed hands. On a gain of you would owe — a tax bill from a transaction that generated no cash to pay it with. There is no seven-year rule here and no inheritance tax to follow, so this is the whole charge.
When your heirs do sell, the property sale TDS calculator shows what the buyer withholds and what is actually owed — and if any of them are non-resident, they inherit the same no-indexation treatment covered in the rent vs buy calculator.
Cross-border estates turn on facts a calculator cannot see. Tell us where you live and what you hold in India, and we’ll point you to someone qualified in the right jurisdiction.
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Ask almost any NRI what happens to their flat in India when they die, and you will hear some version of the same answer: India doesn’t have inheritance tax, so it passes to the children tax-free.
The first half is true. India abolished estate duty in 1985 and has never replaced it. The second half does not follow from it at all.
Most developed countries tax their residents on worldwide assets, and an asset does not stop being yours because it happens to sit eight thousand kilometres away. If you are a long-term resident of the United Kingdom, or a citizen or green-card holder of the United States, your estate for tax purposes includes your Bangalore flat, your NRE deposits and your Indian mutual funds — exactly as though they were held in Croydon or Cleveland.
The tax is charged where you live, on property that never left India. And India gives no credit for it, because India charges nothing to credit against.
A ₹5 crore flat, held by someone who has lived in Britain for fifteen years, sits inside their UK estate. Above the available allowances it is taxed at 40%. That is roughly ₹2 crore of British inheritance tax on an Indian asset, payable by a family who assumed the answer was nil.
Whether it actually lands depends on facts the calculator above lets you test: how long you have been resident, who inherits, whether a home passes to children, and — for British NRIs specifically — one treaty that most advisers never raise.
Buried in the UK statute book is the Double Taxation Relief (Estate Duty) (India) Order 1956. It provides that where someone dies domiciled in India and not in Great Britain, UK inheritance tax is not charged on their property outside Great Britain.
It predates the deemed-domicile era and was never rewritten for it. That accident of drafting means it overrides the long-term residence test introduced in April 2025. An Indian-domiciled person can be UK resident for thirty years and still keep their entire Indian estate outside UK inheritance tax.
It is not a loophole to be relied on casually. Four conditions bite:
That last point is the actionable one. A separate Indian will for Indian property is not merely tidy; it can be the difference between the treaty applying and not.
There is no general rule here, which is why a single page comparing them is useful.
The UK charges 40% on worldwide assets once you have been resident ten of the last twenty tax years — and keeps charging for three to ten years after you leave. The US reaches worldwide too, but on a $15 million exemption that puts most families comfortably clear; the danger there runs the other way, in the $60,000 exemption that applies to non-Americans holding US shares or property.
Canada has no inheritance tax at all, but treats death as a deemed disposal at market value — so the bill arrives as capital gains tax on your final return, on a sale that never happened. Australia abolished death duty in 1979 and charges nothing at death, but your beneficiaries inherit your original cost base and pay when they eventually sell, which is deferral rather than exemption.
The UAE and Singapore charge nothing in either direction. For Gulf-based NRIs the real exposure is not tax but succession: Sharia rules apply by default to UAE assets unless you register a DIFC or ADGM will.
If death looks expensive, gifting during your lifetime looks like the obvious answer. It is sometimes right, but the two tax systems pull opposite ways.
India is the permissive side. Under section 56(2)(x), a gift from a defined relative is exempt in the recipient’s hands with no upper limit — ₹10,000 or ₹10 crore, it makes no difference. Your country of residence is usually not so relaxed: a UK gift needs you to survive seven years, a US gift eats the lifetime exemption your estate was counting on, and in Canada or Australia gifting an appreciated asset is a disposal at market value that generates tax without generating cash.
And note which way round the charges fall. India taxes the recipient. Your country of residence taxes you. A single transfer can be assessed twice, on two different people, under two entirely different theories — with neither side giving credit for the other.
The calculator above is a triage tool, not advice. It tells you whether your Indian assets are inside or outside your country’s net, roughly what the exposure looks like, and which specific traps apply to your situation. That is enough to know whether this is worth paying a specialist to look at properly.
For the Indian side of a return, see the RNOR tracker ; for income arising in both countries, the DTAA estimator . If your heirs will eventually sell Indian property, the property sale TDS calculator covers what the buyer withholds and what is actually owed.
Cross-border estates are the one area where the cost of getting it wrong lands entirely on people who are not around to fix it.