Is redemption of inherited funds taxed?

livemint.com:

My deceased mother was a non-resident Indian (NRI) and during her work abroad, she invested $20000 in a fund falling in the Isles of Man in 2002. This was invested from the funds earned abroad from her foreign bank account. She then retired in 2016 and did not redeem her funds and she became a resident Indian. Now the fund has appreciated to $50000. If I, being a resident Indian, have to redeem this and bring it to India, what will be my taxation? I am a tax payer and fall in the 30% bracket.

—Name withheld on request

Inheritance of foreign assets under a will is not a taxable event whereas the sale of such assets by the legal heir would attract capital gains tax in the hands of the legal heir.

The investment in the Isle of Man fund would be considered as a long-term capital asset and while computing the total holding period of the capital asset, the period of holding by your deceased mother is also to be included. Similarly, the cost of acquisition paid by your deceased mother would be treated as cost of acquisition in your hands too. Capital gains arising from the sale of this investment would be computed by deducting the indexed cost of acquisition from the full value of consideration that would be received.

As per judicial precedents, indexation should be available from the year 2002 (assuming fiscal year 2002-03) till the fiscal year 2023-24 i.e. period starting with the date when the asset was acquired by your deceased mother till the date of sale. The indexed cost of acquisition comes to $66,286 ($20,000 / 105 * 348). Since the indexed cost of acquisition is higher than the sale value, it would result in a capital loss of $16,286, which you may convert into Indian rupees at the SBI buying TT (Telegraphic