The Inheritance May Be Tax-Free — but the Estate Can Still Create Australian Tax Questions
A parent in India leaves an apartment, shares and bank deposits to a child living in Australia.
The instinctive question is usually:
“Does Australia tax the inheritance?”
Australia does not impose a separate inheritance or estate tax merely because a beneficiary receives inherited money or assets.
That is only the first layer.
If an Indian deceased estate earns income, sells assets or accumulates gains after the date of death and then distributes money to an Australian-resident beneficiary, Australia’s foreign-trust rules—especially section 99B—can become relevant. A continuing testamentary trust can be more complicated again.
A lifetime gift is different from an estate distribution. A direct genuine gift from parents is generally not assessable income in Australia, but a payment routed through a foreign trust should not be labelled a “gift” without checking the trust rules.
And when an inherited asset is later sold, Australia and India can use different cost-base rules.
The useful sequence is:
identify gift vs inheritance vs estate/trust distribution → document the source → apply section 99B if relevant → establish the Australian and Indian cost bases → track later income → sell → calculate both countries’ tax → repatriate.
⚡ Quick answer
Is an Indian Gift or Inheritance Taxable in Australia?
Australia has no separate inheritance or estate tax, and a genuine direct gift is generally not assessable income merely because it is received. But that does not make every transfer from an Indian estate or trust tax-free. Section 99B can apply where property of a non-resident trust estate is paid to or applied for an Australian-resident beneficiary, subject to statutory reductions. The ATO has a low-risk compliance approach for certain non-resident deceased-estate distributions made within 24 months of death where the Australian-resident beneficiary receives no more than AUD2 million, but that is an administrative compliance position rather than a blanket statutory exemption. A later sale of inherited assets can also create Australian CGT, while India separately applies its own inheritance, previous-owner cost and repatriation rules.
Key takeaways
Australia has no separate inheritance or estate tax merely because assets are inherited.
A genuine direct gift from parents is generally not assessable income in Australia.
Income earned after receiving a gift or inheritance can be taxable under the normal Australian rules.
An estate distribution is not automatically the same thing as a direct personal gift.
Section 99B can apply when property of a non-resident trust estate is paid to or applied for an Australian-resident beneficiary.
The ATO says section 99B may be relevant where a non-resident deceased estate earns income or gains after the date of death before distribution.
Under PCG 2024/3, the ATO generally treats certain deceased-estate distributions as low risk where distribution occurs within 24 months of death and the beneficiary receives no more than AUD2 million.
That 24-month/AUD2 million position is a compliance approach, not a statutory tax exemption.
The ATO’s deceased-estate low-risk approach does not extend to a testamentary trust established under the will.
Australian inherited-asset cost base depends on the asset and the deceased’s acquisition history; date-of-death market value is not automatically used for every inherited asset.
For many post-20 September 1985 assets, the beneficiary generally starts from the deceased’s cost base, subject to specific exceptions.
Australian residency and temporary-resident rules can separately affect the future CGT treatment of foreign assets.
India generally exempts property or money received under a will, by inheritance, or from specified relatives under its gift/deemed-income rules.
Non-relative gifts can still trigger Indian tax where the statutory ₹50,000 rules apply and no exemption is available.
India generally preserves the previous owner’s cost for gifted or inherited capital assets.
RBI permits eligible NRI/OCI inheritance of Indian assets under the applicable FEMA rules, and qualifying inherited proceeds can use the USD1 million per financial year remittance-of-assets facility.
Keep the will, probate/succession evidence, executor statements, date-of-death asset records, cost history and distribution trail before any later sale.
1. Separate a Direct Gift From an Inheritance and an Estate Distribution
These three events can look similar in a bank statement.
They are not the same legal event.
Direct lifetime gift
A parent transfers money directly to an adult child in Australia with no expectation of repayment or benefit in return.
Inheritance
The beneficiary becomes entitled to assets because of death, a will or succession law.
Estate or trust distribution
An executor, administrator or trustee sells, invests or holds estate assets and later distributes money or property.
The Australian tax analysis can change depending on which of these actually occurred.
A bank description such as “family transfer” is not enough.
Keep evidence showing the legal source of the money.
RegalTicker’s live Nomination, Gifting & Inheritance for NRIs guide covers the Indian transmission, Demat and FEMA side in more detail.
2. Australia Does Not Impose a Separate Inheritance or Estate Tax
ATO guidance is clear that Australia does not impose inheritance or estate taxes merely because a beneficiary receives money or assets from a deceased estate.
That does not mean inherited assets disappear from the tax system forever.
Tax can arise later when inherited shares are sold, inherited property is sold, inherited cash earns interest, inherited property earns rent, or the estate itself earned income or gains before distributing to the Australian beneficiary.
So the useful distinction is:
receipt of inheritance versus income, gains or trust distributions connected with the inheritance
Those are different tax questions.
3. Genuine Direct Gifts From Parents Are Generally Not Assessable Income
ATO guidance also treats genuine personal gifts differently from income.
A genuine gift from parents is generally not assessable income merely because it is received in Australia.
For a material overseas gift, preserve a gift deed or contemporaneous written declaration, donor identity, donor bank statements, donor source-of-funds evidence, relationship evidence and the bank transfer trail.
ATO guidance on overseas related-party gifts makes an important point: calling a payment a “gift” is not enough if the surrounding evidence shows something else.
The donor should genuinely control the funds and voluntarily transfer them without expecting repayment or a material benefit.
Investor note
“Gift” Is a Character, Not a Bank Narration
For a large India-to-Australia transfer, preserve the donor’s source of funds and the legal nature of the transfer. A short bank narration cannot replace the evidence.
4. A Non-Resident Deceased Estate Can Bring Section 99B Into the Picture
Section 99B of the Income Tax Assessment Act 1936 can include in an Australian-resident beneficiary’s assessable income an amount of trust property paid to them or applied for their benefit, subject to statutory reductions.
That matters because a deceased estate can operate as a trust estate during administration.
ATO PCG 2024/3 says section 99B may apply where a non-resident deceased estate derives income or gains after the date of death and later distributes property to an Australian-resident beneficiary.
💡 Real example
Simple example
A parent in India dies owning shares worth AUD500,000 equivalent.
The executor keeps the shares for 18 months.
During administration, the shares rise substantially and are sold.
The executor then distributes the cash to the Australian-resident beneficiary.
The beneficiary has not simply received the exact assets frozen at the date of death.
The estate has generated post-death economic value.
That is where the section 99B analysis becomes important.
5. The ATO’s 24-Month / AUD2 Million Deceased-Estate Rule Is a Low-Risk Position
PCG 2024/3 gives Australian beneficiaries useful practical certainty for many ordinary estates.
The ATO says an arrangement will generally be considered low risk where the deceased was a non-resident at the date of death, the non-resident deceased estate distributes the trust property to the Australian-resident beneficiary within 24 months of death, and the total trust property received by that beneficiary does not exceed AUD2 million at the time it is paid or applied.
The property can include cash or proceeds from estate assets sold during administration.
This is important—but it needs accurate wording.
The rule is not a statutory exemption from section 99B.
It is the ATO’s compliance approach: if the facts fit the guideline and the evidence is available, the ATO generally treats the arrangement as low risk.
A distribution outside 24 months or above AUD2 million is not automatically taxable either.
It simply falls outside that low-risk compliance position and deserves a fuller section 99B analysis.
6. Testamentary Trusts Do Not Get the Same Low-Risk Treatment
The deceased-estate compliance approach in PCG 2024/3 expressly does not extend to a testamentary trust established under the will.
That is a major distinction.
Ordinary estate administration
The executor collects assets, pays liabilities and distributes the estate to beneficiaries.
Testamentary trust
The will directs assets into an ongoing trust that may hold, invest and distribute them over many years.
For an Australian resident, the second structure can create a continuing foreign-trust issue.
So do not tell an executor:
“Distribute within 24 months and every trust problem disappears.”
The 24-month/AUD2 million ATO approach is for qualifying deceased-estate administration, not an ongoing testamentary trust.
7. Australia Does Not Always Use Date-of-Death Market Value for an Inherited Asset
One of the most common inheritance mistakes is assuming every inherited asset starts at fair market value on the date of death.
ATO rules are more nuanced.
For an asset the deceased acquired before 20 September 1985, the beneficiary’s first cost-base element is generally the asset’s market value at the date of death.
For an asset the deceased acquired on or after 20 September 1985, the beneficiary’s first cost-base element is generally the deceased’s cost base at death.
There are exceptions.
For example, certain qualifying main-residence property and special disability trust situations can use market value at death.
That means the correct Australian file needs the deceased’s acquisition date, original cost, improvements and eligible costs, date-of-death value, estate administration costs and beneficiary distribution documents.
Do not use date-of-death value simply because it is easier to obtain.
8. Australian Residency and Temporary-Resident Rules Can Add Another Cost-Base Layer
The inherited-asset rules are not the only Australian rules that can matter.
If the beneficiary becomes an Australian resident while already owning foreign assets, or initially qualifies as an Australian temporary resident and later ceases that status, Australia’s market-value entry rules for relevant foreign CGT assets can become important.
That means two dates may matter:
date the asset was inherited and date the asset entered the ordinary Australian CGT system
RegalTicker’s Invest in India from Australia guide explains those residency and temporary-resident market-value rules.
For a material inheritance, preserve both timelines rather than assuming the inheritance date controls everything.
9. India Generally Exempts Inheritance and Gifts From Specified Relatives
India’s current Income-tax Act, 2025 keeps the familiar receipt-side exemptions.
Section 92 excludes money or property received from a specified relative, on the occasion of marriage, under a will or by inheritance, in contemplation of death, and through certain other specified exempt routes.
The definition of relative includes close family categories such as spouse, siblings, specified in-laws, lineal ascendants and descendants.
So an inheritance from a parent is generally excluded from the Indian gift/deemed-income provision.
A lifetime gift from a parent is also generally excluded because a parent is a specified relative.
The receipt exemption should still be documented.
10. Non-Relative Gifts Can Still Trigger Indian Tax
India does not simply have a universal rule that “all gifts are tax-free.”
Where no exemption applies, money or specified property received without consideration can be taxed under the statutory gift/deemed-income framework.
For money, the familiar aggregate ₹50,000 threshold remains important.
If the relevant aggregate amount exceeds the threshold and no exemption applies, the whole taxable amount can be brought into income under the rules.
The same framework contains separate valuation rules for specified movable and immovable property.
So a gift from a parent and a gift from a friend should not be placed in the same Indian tax box.
11. India Generally Preserves the Previous Owner’s Cost
For a later Indian capital-gains calculation, section 49 generally carries forward the previous owner’s cost where the asset was acquired by gift, will, succession, inheritance or devolution.
That can create a striking mismatch with Australia.
💡 Real example
A father bought Indian shares for ₹4 lakh.
His Australian-resident daughter inherits them many years later when they are worth AUD90,000 equivalent.
For India, the previous-owner cost generally remains relevant.
For Australia, the inherited-asset cost rules and the beneficiary’s Australian residency history can produce a different cost base.
The same later sale can therefore create two different capital gains.
That is normal.
Do not force the Indian gain into the Australian return or the Australian gain into the Indian return.
12. Income After Inheritance Is a New Tax Event
Even where the original gift or inheritance is not assessable income, assets can start producing taxable income immediately afterward.
Examples include interest on inherited bank deposits, dividends on inherited shares, distributions from inherited funds, rent from inherited property and gains on later sale.
For an ordinary Australian resident, foreign income generally enters the Australian tax system.
Qualifying temporary residents can have different treatment for much foreign investment income.
If India taxes the same income, Australia’s Foreign Income Tax Offset can become relevant where the normal FITO conditions are met.
Your live NRE, NRO & FCNR Interest for Australian Residents guide explains the bank-interest side, while Indian Mutual Funds for NRIs in Australia explains the foreign-trust issues for Indian mutual funds.
13. Repatriation Is the Last Step, Not the Inheritance Event
Owning an inherited asset in India and moving the proceeds to Australia are separate steps.
RBI’s remittance-of-assets framework generally allows eligible NRIs/PIOs to remit up to USD1 million per financial year from qualifying NRO balances, sale proceeds of assets and assets acquired by inheritance or legacy, subject to documentary evidence and applicable Indian taxes.
Amounts above the facility can require RBI approval.
For inherited Indian immovable property, FEMA inheritance rules can also permit an NRI/OCI to acquire property in circumstances where ordinary purchase rules would be more restrictive.
For the broader banking process, use RegalTicker’s NRI Repatriation from India guide.
A strong remittance file can include:
| Record | Why it matters |
|---|---|
| Will / succession evidence | Proves entitlement |
| Death certificate | Establishes estate timeline |
| Probate / executor documents | Estate authority |
| Date-of-death asset schedule | Estate corpus evidence |
| Deceased’s acquisition records | Australian and Indian cost analysis |
| Distribution statement | Section 99B evidence |
| Estate income/gain records | Identifies post-death growth |
| Gift deed, if applicable | Distinguishes lifetime gift |
| Indian tax computation | Later sale / income tax |
| Australian tax working | CGT / section 99B / FITO |
| NRO / sale statements | Repatriation trail |
| Bank remittance documents | Source-of-funds evidence |
RegalTicker’s Demerger Cost Basis Calculator is not an inheritance calculator, but the lesson is the same: preserve cost evidence before the asset is sold.
Frequently asked questions
Does Australia have inheritance tax?
Australia does not impose a separate inheritance or estate tax merely because a beneficiary receives inherited money or assets. Tax can still arise from estate distributions, later income or a later sale.
Is a cash gift from parents in India taxable in Australia?
A genuine direct gift is generally not assessable income. Keep evidence showing the donor, source of funds, voluntary nature of the gift and bank trail.
Is an estate distribution the same as a gift?
No. A distribution from a non-resident deceased estate or trust can require section 99B analysis even where the underlying family transfer arose because of death.
What is section 99B?
Section 99B can include trust property paid or applied for an Australian-resident beneficiary in assessable income, subject to statutory reductions including qualifying corpus.
Does section 99B apply to every foreign inheritance?
No. The facts and source of the distribution matter. The ATO specifically notes potential section 99B issues where a non-resident deceased estate derives income or gains after death before distributing to an Australian beneficiary.
What is the ATO’s 24-month rule?
PCG 2024/3 treats certain distributions from a non-resident deceased estate as low risk where distribution occurs within 24 months of death and the Australian-resident beneficiary receives no more than AUD2 million.
Is the 24-month/AUD2 million rule a tax exemption?
No. It is an ATO compliance-risk approach, not a statutory exemption. Falling outside it does not automatically make a distribution taxable.
Does the low-risk rule apply to a testamentary trust?
No. PCG 2024/3 expressly says the deceased-estate compliance approach does not extend to a testamentary trust established under the will.
What is my Australian cost base for inherited shares?
It depends on the facts. For many assets the deceased acquired on or after 20 September 1985, the beneficiary generally starts from the deceased’s cost base. Pre-CGT assets generally use market value at death, subject to the detailed rules and exceptions.
Does India tax an inheritance?
Money or property received under a will or by inheritance is generally excluded from India’s section 92 gift/deemed-income rules.
Is a gift from parents taxable in India?
Gifts from specified relatives, including parents, are generally excluded from section 92’s gift/deemed-income rule.
Can a gift from a friend be taxable in India?
Yes. Where no exemption applies, the ₹50,000 aggregate threshold and the relevant property valuation rules can bring a non-relative gift into tax.
What cost does India use when I later sell an inherited asset?
Section 49 generally carries forward the previous owner’s cost for assets received by gift, will, succession or inheritance.
Can inherited money be remitted from India to Australia?
Eligible inherited assets and sale proceeds can generally use RBI’s USD1 million per financial year remittance-of-assets facility, subject to documents, taxes and the authorised dealer’s checks.
Verify through official sources
Official references
- Australian Taxation Office — Beneficiary of a Deceased Estate — Australia has no inheritance or estate tax, but inherited assets can create later CGT and income obligations.
- Australian Taxation Office — PCG 2024/3 Section 99B — Section 99B deceased-estate guidance, 24-month/AUD2 million low-risk approach and testamentary-trust exclusion.
- Federal Register of Legislation — Income Tax Assessment Act 1936 Section 99B — Statutory section 99B rule for trust property paid or applied for a resident beneficiary.
- Australian Taxation Office — Cost Base of Inherited Assets — Australian cost-base rules for inherited assets and later CGT.
- Australian Taxation Office — Gifts or Loans From Related Overseas Entities — Evidence expectations for genuine overseas gifts and inheritances.
- Income Tax Department, India — Income-tax Act 2025 Section 92 — Current gift/inheritance exemptions and definition of relative.
- Income Tax Department, India — Tax Treatment of Gifts — Current ₹50,000 gift threshold and exemptions for relatives, wills and inheritance.
- Income Tax Department, India — Section 49 — Previous-owner cost rule for capital assets received by gift, will, succession or inheritance.
- Reserve Bank of India — Acquisition and Transfer of Immovable Property by NRI/OCI — FEMA rules for NRI/OCI gifts and inheritance of Indian immovable property.
- Reserve Bank of India — Master Direction on Remittance of Assets — USD1 million annual facility for qualifying NRO balances, inherited assets and sale proceeds.
Educational disclaimer: This guide is for investor education and general Australia–India tax awareness. It is not individual Australian or Indian tax, estate, succession, trust, CGT, FEMA, legal or investment advice. Section 99B, inherited-asset cost base, temporary-resident treatment, Indian gift tax, succession rights and repatriation depend on the estate structure, asset history, relationship, residency and tax year.
Final takeaway
Inheritance Tax May Be Zero — but the Paper Trail Still Matters
For an Australian resident receiving assets from India, the clean sequence is:
identify gift vs inheritance vs estate/trust distribution → preserve estate and donor records → test section 99B → establish Australian and Indian cost bases → report later income → calculate both countries’ tax on sale → claim FITO where available → repatriate through the correct route.
The receipt itself is often simple.
The difficult part is proving what happened between the donor or deceased owner and the final money that reaches Australia.
