The Inheritance of Loss is a book about the rigid class systems that exist in India and abroad amongst Indians, and the struggles that the people face within these classes after colonialism. The book takes place in a town called Kalimpong, which is near Darjeeling in the north-westernmost point in India. The story begins in the high northeastern Himalayas in Kalimpong. Sai, a seventeen year old, lives with a judge, his dog and his cook. It is a turbulent time, filled with dissatisfaction among the population of Indian-Nepalese, who want to separate and have their own country apart from India. There is an insurgency to draw new borders that will create peace in theory, yet violence is the tool to create this peace.They are robbed by members of the Gorkhaland National Liberation Front, who take their food, liquor and guns. This introduces the political struggle that the region is facing, as well as the breakdown of the social fabric.

The judge is Sai's grandfather, who took her in after his daughter and her husband were killed in a car accident. He takes her in in order to pay off the spiritual debts that he incurred from abandoning his wife, and later killing her, as well as shaming his father. He fights with his guilt throughout the book, making it seem as though he will one day change his rough exterior and learn to love again. Sai falls in love with her tutor, whose name is Gyan, and throughout the story they fight to accept the natural love they have created. Their love is doomed from the beginning because he is an ethnic Nepali, and she is an upper-class, Western-educated Indian girl. The cook watches over them to make sure that Gyan does not take advantage of Sai's good heart, and at the same time worries about his own son in the U.S., whose name is Biju.

Biju is the typical Indian immigrant who gets a visa to the U.S. and stays illegally, working for slave wages in the kitchen basements of New York City. There he is used and abused by his bosses and is run ragged by one in particular, who also happens to be Indian. Upset with the way his life is turning out, and by how much he misses his father, he decides to leave the U.S. with his earnings and return back to his home and his father.

Throughout the book, the political situation worsens and each person deals with it in their own unique way. All of them are consumed with guilt for how they have lived their lives thus far and desire to change their existences.