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Are you an NRI who looks forward to buying agriculture land in India? If yes, you must consult a good lawyer or financial consultant before the transaction.
Many NRIs look forward to buying agricultural land in India either for investment purpose or just have a holiday home or a farmhouse.
But the rules and regulations related to NRIs and OCIs purchasing agriculture land in India are complicated. The laws differ from state to state too.
Meanwhile, you can increase your general knowledge regarding basic rules and regulations for NRIs and OCIs to buy agricultural land by going through the below-mentioned points.
What do the Guidelines Say on NRI Agricultural Land purchase
Let’s consider the guidelines: As per the Foreign Exchange Management (Permissible Capital account transactions) Regulations, 2000 read with Foreign Exchange Management (Acquisition and transfer of immovable property in India) Regulations 2000, any immovable property other than agricultural land, plantation or farmhouse can be purchased by a person resident outside India or Overseas Citizen of India.
So an NRI or OCI can buy Residential & Commercial Property in India but an NRI or OCI is NOT ALLOWED buy any agricultural land or plantation property or farmhouses in India by law unless they get a special permission from the Reserve Bank of India (RBI).
Can NRI receive the same via Gift.
No. NRIs cant acquire agriculture land in India even by gift . As per RBI A person of Indian origin resident outside India does not require any permission to acquire any immovable property in India other than agricultural land/farm house/plantation property by way of gift from a person resident in India or from a person resident outside India who is a citizen of India or from a person of Indian origin resident outside India.
What if an NRI inherits an Agricultural Land.
This is the only easiest way for an NRI to own land in India . If you as an NRI or an OCI receive any agricultural land in inheritance, you can keep it in your name. But the legacy should be from a person residing in India. On the other hand, if you inherit the property from an NRI, you will need to comply with RBI’s regulations and approval.
Can an NRI Gift the Inherited Agriculture property.?
NRIs are allowed to transfer the ownership by Gift or Sale. However the same can only be done to a permanent resident of India.
To Summarise, An NRI or OCI can receive an agricultural/ plantation property or a farmhouse as a gift from a Resident Indian but they can’t give such properties to other NRIs as gifts
Sale of Agricultural Land by NRI
NRIs and OCIs can sell agricultural land, plantation property, or a farmhouse only to a Resident Indian. For the lands purchased with permissions from RBI, special approvals are required to complete sale transactions.
The proceeds from the property need to be deposited in the NRO account of the NRI. The maximum amount that can be remitted from an NRO Account is US$ 1 million per annum. The process of repatriation is the same done for outward remittances involving the forms 15CA and 15CB. In addition to these, other documents which can be asked for are like:
- Sale Agreement, including the chain agreements
- Death Certificate (if required)
- Legal Heir Certificate
- Legal Will
- Bank statement, in case the amount is not deposited in the remitting bank.
- Form 15CA and 15CB
will, legal heir certificate, death certificate (in case of inheritance), and sale agreement (in case of sale)
Tax on Sale of Agriculture Land
Capital gains tax does not apply to rural agricultural land because it is not considered a capital asset. Whereas, urban agricultural land is regarded as a capital asset. Thus, the capital gains tax applies to urban agricultural land.
It is pretty clear by now that buying agricultural land in India is more complicated than purchasing any other commercial or residential property. So it matters to contact an experienced financial consultant and lawyer to guide you through this process.
Permission from RBI
In case an NRI desires to acquire agricultural land through means other than inheritance, you can send an application to RBI. RBI will entertain the same in only very special cases. This rule is according to the Foreign Exchange Management Act and Foreign Exchange Management Regulations, 2018 (acquisition and transfer of immovable property in India). The same rule applies to OCIs as well.
NRI’s Benami Transaction
You can’t buy agricultural land in anyone else’s name if you are an NRI. That transaction will be deemed as a “Benami” or illegal trade. That transaction will only be legal if the concerned person is in your close family. You can buy the land in the name of your brother, sister, spouse, your ancestors, or your successors. But we recommend consulting a lawyer before going ahead with such a transaction due to the complexity of the process and documentation.
Under the Benami act, you can’t lend money to any Indian citizen and enjoy the profit from agricultural or plantation land. It will be a punishable offence under the law.
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