Inheriting costs you nothing, selling is where tax starts
The first thing to settle is that receiving the house is not a taxable event. India abolished estate and inheritance tax long ago, and the gift rules specifically exclude anything received under a will or by inheritance, so nothing is due when the property passes to you. You can hold it as long as you like with no Indian tax on the holding itself, beyond any local property taxes.
Tax arises only when you sell, as capital gains. So the whole exercise is really about being set up to sell cleanly and to pay the right, usually modest, tax on the gain rather than an inflated withholding.
The three things you need before you can sell
As someone with no Indian tax footprint, you need to put three things in place.
A PAN. You cannot sell or file without one. As an OCI on a foreign passport you apply on Form 49AA, the PAN form for people who are not Indian citizens, which becomes Form 95 from FY 2026-27. It is driven by your passport nationality, not where you live.
An NRO account. The sale proceeds are rupee funds from an Indian source, so they must go into an NRO account, not an NRE account, which is only for money earned abroad.
Awareness of the TDS. Because you are a non-resident seller, the buyer does not deduct the 1% a resident seller faces. The buyer deducts under Section 195 on the full sale value, at the long-term rate of 12.5% plus surcharge and cess, which is a large sum held back until you reclaim it.
Your cost is the old owner's cost, so the real gain is smaller
The number that matters for tax is the gain, not the sale price, and your cost is not zero just because you inherited. Under Section 49(1) your cost is what the original owner paid, and the holding period includes theirs, so the sale is almost always long-term. If the property was bought before April 2001, you can instead use its value as on 1 April 2001, under Section 55(2)(b), which is usually much higher than the old purchase price and cuts the gain further.
So the taxable gain is the sale price minus that carried-over or 2001 cost, taxed at 12.5% without indexation. As an OCI you do not get the 20% with indexation option that resident sellers have, but 12.5% on the gain is still far less than the TDS taken on the whole price.
You do need to file, and that is how you get money back
You must file an Indian return, ITR-2, for the year you sell. Two reasons make it unavoidable. A non-resident cannot set a capital gain against the basic exemption the way a resident can, so any taxable gain creates a liability and a filing duty. And because TDS was taken on the entire sale value, far more than the tax on your actual gain, filing the return is how you claim the difference back as a refund with interest.
Once the tax is settled and the refund in hand, you repatriate the money out of the NRO account, up to one million dollars per financial year, under the RBI remittance-of-assets route, with Form 15CA and a chartered accountant's Form 15CB (Form 145 and 146 from FY 2026-27). If more than one of you inherited, each heir has their own one million dollar limit.
A worked example
Meera, an OCI in Canada who has never lived in India, inherits her father's Bengaluru flat, which he bought in 1998, and sells it for one crore rupees.
Because the flat predates 2001, her cost is its 1 April 2001 value, say twenty-five lakh, not zero and not the old purchase price. So her taxable gain is about seventy-five lakh, taxed at 12.5% with surcharge and cess, roughly eleven lakh of Indian tax. The buyer, though, deducts under Section 195 on the full one crore, about fourteen lakh, so more than she owes is held back. Meera gets a PAN on Form 49AA, files her return to bring the tax down to the eleven lakh on her real gain, reclaims the roughly three lakh difference with interest, and repatriates the money within her one million dollar limit for the year.