It is very common for NRIs to look for a farmhouse or wish to get close to nature by buying agricultural land in India. Wait a minute… Can NRI invest in Agricultural Land in India? It is not easy as regulations restrict few transactions. Here are the details on NRI investments in Agricultural Land in India.
Why would NRI buy Agricultural Land in India?
The reasons could be many –
- Investment
- Looking for a career in organic, or new methods of farming or agro-based products.
- Got agricultural land as inheritance and redevelop that land.
- Just to be close to nature or weekend gateway.
Can NRI Invest in Agricultural Land in India?
Well, the FEMA act & various master circulars layout terms are as follows. Here are the opening lines of RBI’s FED Master Direction No. 12/2015-16 –
Acquisition/ transfer by a Non- Resident Indian (NRI)
3.1 Acquisition of immovable property
3.1.1 An NRI or an OCI can acquire by way of purchase any immovable property (other than agricultural land/ plantation property/ farm house) in India.
3.1.2 An NRI or an OCI can acquire by way of gift any immovable property (other than agricultural land/ plantation property/ farm house) in India from person resident in India or from an NRI or an OCI who in any case is a relative as defined in section 2(77) of the Companies Act, 2013.
3.1.3 An NRI or an OCI can acquire any immovable property in India by way of inheritance from a person resident outside India who had acquired the property in accordance with the provisions of the foreign exchange law in force at the time of acquisition.
3.1.4 An NRI or an OCI can acquire any immovable property in India by way of inheritance from a person resident in India
3.2 Transfer of immovable property
- An NRI or an OCI may transfer any immovable property in India to a person resident in India;
- An NRI or an OCI may transfer any immovable property (other than agricultural land or plantation property or farm house) to an NRI or an OCI. In case the transfer is by way of gift the transferee should be a relative as defined in section 2(77) of the Companies Act, 2013.
This means: NRI Cannot Acquire Agricultural Land, Farmhouse, or Plantation Land.
- NRI cannot purchase and agricultural land, farming land, or farmhouse.
- NRI cannot accept the gift which is in form of agricultural land, farming land, or farmhouse.
They can inherit agricultural land, farming land, or farmhouse from any resident or non-resident. If inheritance is from an NRI, he/she needs to get permission from RBI for the transaction. The inheritance can be by partition, through a will, family arrangement, or disbursement from a HUF or Trust.
Update: 30 Dec 2021
RBI in response to a case in the Supreme Court of India clarified that their permission is not needed for Property Deals by NRIs. Source Time of India
So can an NRI Sell agricultural land, farming land, or farmhouse in India?
Yes, we have seen that there are very limited ways NRI can acquire agricultural land, farming land, and plantation land, or a farmhouse. He can sell these by taking permission from the RBI. He can only sell these to any resident in India.
Frequently Asked Question?
Can I invest in agricultural land in name of any resident in India (friend or distant relative) and later on get the transfer in my name? Or,
I am getting an agricultural land piece gift from my relative or friends, and I understand that I cannot get a transfer in my name. But can I get the gift in name of my wife or brother who is a resident?
The answer is NO. This transaction is an intentional violation of FEMA rules and the Benami Property Act. So avoid.
Can an NRI bequeath their agricultural property to Resident or NRI?
Yes, they can bequeath (through a Will) any property residential, commercial, or agricultural to NRI or Resident.
Can I gift my agricultural property to the Resident or NRI?
Yes, but only to a Resident. Gifts received from relatives (as defined under the Income Tax Act) are not taxed — but at the time of registration, one has to pay the prevalent stamp duty and registration charges. If the gift is not given to a defined relative it is taxable in hands of the receiver as income.
I have agricultural land already. As NRI can I lease agricultural land?
Yes… you can. The land should be in your name legally (as mentioned above ways). If it is through a Benami-type transaction and you are getting the benefit you are on the wrong side of the law. Otherwise, sure you can generate income on your land and repatriate it or further invest as per rules.
Selling of Agricultural Land by NRI
Suppose a person already has agricultural land, farming land, or farmhouse before he became an NRI or received the property by inheritance – can he sell?
Yes, it is permitted. An NRI can sell his share to a resident by taking approval from RBI. In some cases like NRIs from Gulf countries need to take permission from their countries before buying or selling any agricultural land.
The money can also be repatriated as per rules (LRS & by fulfilling CA/CB formalities). Transfer of title of the inherited property is a complicated process and may involve a court process too.
The NRI property transactions need a good amount of research and law-related knowledge. It is advised to take professional help from lawyers.
