Can NRIs buy agricultural land in India? FEMA rules explained
FEMA regulations prohibit Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs) from acquiring agricultural land, plantation property, or farmhouses in India. These properties can only be acquired via inheritance, and any sale proceeds must follow strict NRO account repatriation rules.
Agricultural land is strictly prohibited for NRIs/OCIs
Under FEMA notifications, NRIs and OCIs cannot purchase agricultural land, plantation property, or farmhouses in India. They are only permitted to purchase residential or commercial properties. Agricultural property can only be acquired by an NRI/OCI through inheritance from a resident Indian.
Key points
- Purchase ban — FEMA strictly bans the purchase of agricultural land, plantation property, and farmhouses by NRIs and OCIs.
- Inheritance allowed — NRIs and OCIs are permitted to inherit agricultural land from resident Indians, subject to tax clearances.
- Repatriation limits — Sale proceeds of inherited agricultural land must be credited to an NRO account and are subject to the $1 Million USD annual limit.
RBI and FEMA regulations on agricultural land
FEMA regulations state that a person resident outside India (NRI or OCI) cannot acquire by way of purchase any agricultural land, plantation property, or farmhouse in India. This ban is absolute and cannot be bypassed through power of attorney or non-permitted joint holdings.
The primary purpose of this restriction is to protect agricultural resources and preserve farming ownership for resident Indian citizens. Any attempt by an NRI to buy such property without specific, prior written approval from the Reserve Bank of India (RBI) is a violation of FEMA and can lead to confiscation of the property and heavy penalties.
If you want to invest in Indian real estate, you are fully permitted to purchase any number of residential or commercial properties. There is no limit on the number of residential/commercial properties an NRI can own, and funding can be done via NRE, NRO, or FCNR accounts.
Rules for inheriting agricultural property
While purchase is prohibited, NRIs and OCIs are fully permitted to inherit agricultural land, plantation property, or farmhouses from resident Indians. The inheritance process follows standard Indian succession laws.
To register inherited agricultural land, the NRI must submit proof of inheritance (such as a registered Will, succession certificate, or mutation records) along with KYC documents showing their non-resident status to the local land registry.
Once inherited, the NRI can hold the property, lease it to resident farmers, or sell it. However, the property can only be sold to a person resident in India who is a citizen (it cannot be sold to another NRI or OCI).
Repatriation of sale proceeds of agricultural land
When an NRI sells inherited agricultural land, the sale proceeds cannot be directly credited to an NRE account or repatriated abroad without tax clearance.
The proceeds must be credited to an NRO account. The NRI can repatriate up to $1 Million USD per financial year from their NRO account balances, subject to submitting Form 15CA and Form 15CB signed by a Chartered Accountant.
The transaction requires proof of tax payment. Capital gains tax is applicable on the sale, and the buyer is required to deduct Tax Deducted at Source (TDS) before paying the sale proceeds to the NRI.
Frequently asked questions
Can an NRI buy agricultural land jointly with a resident Indian?
No. An NRI cannot purchase agricultural land in India even as a joint holder with a resident Indian. The prohibition on acquisition by purchase applies to any fractional share or co-ownership of agricultural property by a non-resident.
Can an NRI gift agricultural land to another NRI?
No. An NRI can only gift agricultural land, plantation property, or a farmhouse to a person resident in India who is a citizen. Gifting agricultural property to another NRI or OCI is not permitted under FEMA regulations.
What is the tax rate on sale of inherited agricultural land?
Long-term capital gains (LTCG) on inherited agricultural land is taxed at 12.5% (or 20% with indexation depending on the acquisition date under recent budget rules). The buyer must deduct TDS at the highest rate unless the NRI obtains a Lower TDS Certificate from the Income Tax department.