Can NRI buy agricultural land in India?

Once upon a time, a young NRI named Vikram dreamed of reconnecting with his roots. Born and raised in a bustling metropolis abroad, Vikram often found himself craving for the simplicity and serenity of his ancestral village near the river Godavari.

Driven by a desire to invest in something meaningful and tangible, Vikram began researching the possibility of purchasing agricultural land in India as an NRI. Does this story sound familiar?

A lot of NRIs want that after retirement they have their own farmhouse in a small town but Can an NRI buy agricultural land in India?

Be it financial investments or property rules are a bit different for NRIs.

The rules related to transactions in  NRI agricultural lands, plantation properties, and farmhouses are different as compared to those related to residential and commercial property.

Also Check: Should NRIs Get A Life Insurance Cover In India?

Can NRI Buy Agricultural Land in India

Under the Foreign Exchange Management Act and the Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations, 2018, NRIs and OCIs are not allowed by law to purchase lands or plantation property, or farmhouses in India unless they acquire special permission from RBI.

But when we tell this to NRIs they ask creative questions like – NRI wife can buy agricultural land in India? Can OCI buy farmland in India? The answer is simple – same as above.

Inheritance of Agricultural Land for NRI

NRIs or OCI can acquire agricultural land, plantation property, or farmhouse through inheritance from a family member residing in India. An NRI can also inherit property from another NRI. But this is subject to certain regulations like RBI’s approval.

Must-Read – Rules for OCI cardholders

Gift of Agricultural Land for NRIs

There is no restriction for NRIs and OCIs to get NRI agricultural lands, plantation property, or farmhouse as a gift from a person resident in India. (but consider the Benami act)

“But an NRI or OCI cannot gift such property to another NRI. An NRI has to gift it to a resident citizen of India.” wiseNRI

Sale Of Agricultural Land 

NRIs can sell agricultural land, plantation property, or farmhouse property provided the buyer is a citizen of India and resides in India. If the NRIs have purchased such lands with permission from RBI, they require approval from RBI to complete a sale transaction.

The sales proceeds can be remitted to an NRO account. The amount up to a maximum of US$ 1,000,000 can be repatriated. The repatriation process requires some documentation. The bank requires the submission of Form 15CA and Form 15CB, Will, legal heir certificate, and death certificate (in case of inheritance), and sale agreement (in case of sale).

Also Check: New Tax Rules for NRI in India

Taxation On Agricultural Land for NRI 

Rural agricultural land is not a capital asset hence capital gains tax is not applicable. However, if the agricultural land is defined as urban agricultural land, it is chargeable under capital gains tax.

Also Check: 10 Best Investment Options For NRIs

Benami Transactions – NRIs

An NRI cannot buy agricultural land in the name of another person unless that person is a spouse, brother, sister, or lineal ascendant or descendant. It will be considered a Benami transaction which is illegal. (please consult a good lawyer as our knowledge is limited in this)

An NRI gives money to a friend or a son-in-law. This person uses the money to buy land, and the gains from that land are passed to the NRIs.  This is a Benami transaction, and the persons involved in it are punishable by law.

Land transactions can be tricky. The rules are different in different states. It might be difficult to have updated information as an NRI or OCI who is not always present in India. You have to research and understand factors like the legitimacy of land, compliances to be followed, etc. at the time of a property purchase and understand the rules for selling. It might be better to consult a real estate lawyer before entering into the transaction.

How to get RBI permission to buy agricultural land by NRI?

Yes, it’s a common practice but a long and difficult process.

Requests for the acquisition of agricultural land, plantation property, or farmhouse by individuals residing outside India or foreign nationals should be directed to The Chief General Manager, Reserve Bank of India, Central Office, Exchange Control Department, Foreign Investment Division (III), Mumbai 400 001.

The acquisition and transfer of immovable property by Indian residents outside India and non-residents in India are regulated under sub-sections (3), (4), and (5) of Section 6 of the Foreign Exchange Management Act, 1999 (FEMA), along with Notification No. FEMA 7(R)/2015-RB dated January 21, 2016, and Notification No. FEMA 21/2000-RB dated May 3, 2000. These regulations are periodically amended to reflect changes in the regulatory framework and are communicated through amendment notifications.

Information shared by a reader:

Application to be submitted by NRIs to the FEMD and not ECD please . After FEMA has replaced, Exchange Control Act the dept name was modified as Foreign Exchange Management Dept please.

Check – NRI investments in Commercial property.

Should NRIs consider investing in fractional ownership companies to purchase agricultural land in India?

Jason Jewig, a renowned financial author, famously wrote, “If you want to get rich, sell lies to people who want to hear those lies.” Consequently, several companies are raising funds from NRIs to invest in agricultural land in India. However, the legality of such investments is debatable. SEBI recently banned one such platform. Therefore, my suggestion is not to play with fire and instead adhere to the rules and guidelines issued by RBI and SEBI in this regard.

If you have any questions or you are aware of NRI agricultural land issues – add them in the comment section.