Indian property and your US tax return

By Parish Rao · 4 September 2026 · 6 minute read

Americans of Indian origin get a lot of contradictory advice about property back home. Some of it is alarming and wrong. Here is the shape of it in plain words, with the boundary of our expertise stated clearly.

The property itself is usually not the reportable thing

Directly held foreign real estate is generally not what the foreign account reporting forms are aimed at. Those forms are about financial accounts and certain financial assets.

What often is reportable is everything attached to the property. The Indian bank account your rent flows into. The account a sale is settled through. Those are financial accounts, and once your foreign accounts pass a threshold in aggregate, reporting obligations follow.

So people who assume the house is the problem often have it backwards. Confirm your position with your CPA rather than with a forum.

Inheriting: the form and the step up

Two separate things happen when you inherit Indian property, and they are easy to confuse.

Reporting the inheritance. A foreign inheritance above a threshold generally has to be reported on Form 3520. This is a reporting form, not a tax bill.

Getting a step up. Your American cost basis becomes the fair market value on the date the previous owner died. This is genuinely valuable and it usually reduces what you owe when you eventually sell.

That second one needs a number, at a specific past date, that can be defended. It is the single most common valuation an American client asks us for.

Selling: taxed in both places, relieved through the treaty

India generally has the first right to tax property situated in India. The gain is also relevant on your American return, and relief for the Indian tax normally comes through the treaty and a foreign tax credit.

The relief is not automatic. It has to be claimed properly, with the Indian paperwork to support it, which is one reason to keep every Indian document rather than discarding it after the sale.

Separately, expect the deduction at source shock on the Indian side, covered in the NRI TDS post.

Where valuation actually enters

• Date of death value for your American basis, if the property was inherited.
• 1 April 2001 value for the Indian computation, if the family held it that long.
• Current value if a divorce, a family settlement or a loan is involved.

Different dates, different purposes, one property. The relationship between the first two is explained in one inherited property, two valuations.

The honest boundary

We are registered valuers in India. We are not American tax advisers and we will not pretend to be, because getting this wrong is expensive for you and unprofessional of us.

Your CPA decides what you file. We make sure the property figures inside those filings are evidenced, dated and defensible, and we are happy to explain the report to them directly.

See our USA page, or read about capital gains valuation.