Is gold inheritance tax free in India? How FEMA rules shape cross-border inheritance, transfers

India’s tax landscape around inherited assets is far simpler than many assume. While questions often arise about how inherited property, gold, or investments are taxed, experts clarify that the act of inheriting itself carries no tax burden. Yet, depending on what heirs eventually do with the assets, specific income-tax and foreign-exchange rules may apply.

India scrapped its wealth tax in 2015 and abolished inheritance and gift taxes long before that. As a result, assets passed down through generations—whether real estate, jewellery, or financial investments—can be received tax-free. “Inheritance tax, estate duty, gift tax, and wealth tax are all abolished in India—therefore no tax liability arises under these laws,” said Lokesh Shah, Partner at CMS IndusLaw.

Shah explained that while the Income Tax Act contains certain “deeming provisions” that tax recipients of gifts in specific cases, inheritances remain fully exempt. “Receipt of property or money under a will or by way of inheritance is not liable to tax in the hands of the recipient,” he said.

When does tax kick in

Although inheriting is tax-free, selling the inherited asset can trigger capital gains tax. The nature of the asset and the holding period determine whether the gains are classified as short-term or long-term, which in turn affects the tax rate.

Importantly, when calculating capital gains, the cost of acquisition is not taken as zero for inherited assets. Instead, heirs can use the cost at which the previous owner—often a parent or grandparent—originally purchased the asset. “The cost basis is determined with reference to the cost of the previous owner,” Shah said. This step-up in cost can significantly reduce taxable gains, especially for assets held for decades.

For example, if a parent bought a property in the 1980s and the heir sells it today, the original purchase price (adjusted for inflation through indexation, depending on current tax rules) will be used to compute capital gains, offering substantial tax efficiency.

Taxation & FEMA rules on gold and other inherited assets

Asset	Key points
Is gold inheritance tax-free in India?	Yes. India has no inheritance tax, no estate duty, and no wealth tax (abolished in 2015). Gold received through a will or inheritance is fully tax-exempt at the time of transfer.
Is gift tax applicable on inherited gold?	No. Inherited assets are excluded from the “gift tax-like” deeming provisions under the Income Tax Act.
When is tax applicable?	Tax applies only when the inherited gold is sold. The tax is levied as capital gains.
How is capital gains on inherited gold calculated?	The cost of acquisition = cost to the previous owner (not zero). Holding period is also counted from the date when the previous owner acquired it.
Short-term vs. long-term tax	• Short-term (held ≤ 3 years): taxed at individual slab rate. • Long-term (> 3 years): taxed at 20% with indexation (as per existing regime rules).
Cross-border inheritance: FEMA relevance	EMA rules govern whether an NRI/OCI or a resident Indian is allowed to inherit certain assets. Tax treatment remains the same (still tax-free).
NRIs/OCIs inheriting gold or assets in India	Permitted under FEMA. An NRI/OCI can inherit gold, movable assets, and immovable property from a resident or non-resident relative, subject to conditions.
Resident Indians inheriting assets abroad	Allowed if the deceased acquired those assets in compliance with foreign exchange laws applicable at that time. Applies to gold, property, and securities.
Inheritance of foreign securities	A resident Indian may inherit foreign securities from a resident (who held them legally) or a non-resident.
Any tax difference if heirs are abroad?	No difference for Indian tax purposes. Inheritance remains tax-free, but foreign jurisdictions may have inheritance/estate tax.

Cross-border inheritance

Inheritance becomes more complex when assets or heirs are located outside India. Shah noted that tax treatment largely remains consistent—inheritance is still tax-free—but exchange-control rules under the Foreign Exchange Management Act (FEMA) play a crucial role in determining what can be inherited and how.

For instance, an NRI or Overseas Citizen of India (OCI) can inherit immovable property in India from a resident or even a non-resident, subject to certain conditions. Conversely, a person resident in India may inherit property located abroad if the deceased had acquired it in compliance with the foreign-exchange laws applicable at that time.

The rules vary for securities as well. A resident individual can inherit foreign securities from another resident who legally holds them, or from a non-resident relative.

These cross-border provisions ensure that while India imposes no tax on inheritance, the flow of assets across jurisdictions remains regulated.

A tax-friendly regime

Experts say the abolition of inheritance-related taxes makes India one of the more favourable jurisdictions for intergenerational wealth transfer. However, heirs must remain mindful of capital gains rules and FEMA requirements when selling or inheriting assets that cross national boundaries.

While receiving inherited assets may be tax-free, understanding what comes next is key to maximising long-term financial outcomes.