There is often a widespread debate regarding the abilities of NRIs to invest in agricultural land. Can they buy these types of plots? Here’s settling the debate once and for all!
Can NRIs buy agricultural land? This is certainly a million dollar question that everyone has endlessly debated about for years! While NRIs (Non-Resident Indians) are big-time residential and commercial real estate investors, agricultural land continues to be a tricky affair. As per FEMA and the Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) laws, let us be clear on one aspect- NRIs cannot buy agricultural land, farmhouses or plantations in India.
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FEMA (Foreign Exchange Management Act) of 1999 is the guiding legal statute for NRI transactions, payments, external trade and also promotion and development of India’s foreign exchange market. It has clearly ruled in 2018 that NRIs cannot purchase land and related properties in this category. Yet, there is still one way out- NRIs may take special permission from the RBI (Reserve Bank of India) which may be granted only after various aspects are considered. Agricultural land may only be sold to Indian residents, while income from the usage/transfer of inherited property in the country (in case of inherited properties of NRIs), will be taxable here as well.
This brings us to our next point- NRIs can certainly inherit agricultural land from resident Indians although they cannot purchase the same. However, NRIs may invest freely in residential and commercial properties throughout India. Those wishing to buy agricultural land should apply to the RBI for permission (which is rarely given). How and where do they apply?
They should write to the Chief General Manager of the RBI and post their letters to this address:
The Chief General Manager,
Reserve Bank of India,
Central Office, Exchange Control Department, Foreign Investment Division (III), Mumbai- 400 001
What the RBI also said on the issue
The RBI has stated in the recent past that OCIs and NRIs will not need any prior permission for buying or transferring immovable properties in India. However, the only exception will be plantations, agricultural land and farmhouses. This has been issued as an official RBI clarification after various queries were sent to its offices throughout the country. A judgment of the Supreme Court relating to FERA (Foreign Exchange Regulation Act) led to several OCIs (Overseas Citizens of India) posting their queries to the RBI regarding purchase of immovable properties in India.
The RBI has officially confirmed that OCIs or NRIs will be legally governed in this aspect under the guidelines of the 1999 FEMA and do not need any approval for buying commercial and residential properties in the country.
The Whole Selling and Gifting Aspect of it
However, NRIs can sell their inherited property or even gift away the same while remitting this money outside the country. OCIs or NRIs may sell inherited plantations, agricultural land and farmhouses to Resident Indians only. For those agricultural plots bought with the RBI’s special permission, they will have to complete proper sale transactions. The sale proceeds should be remitted into the NRO account of the NRI seller. The maximum remitted amount can be US$1 million from this NRO account. The repatriation procedure is the same for all outward remittances which cover Forms 15CB and 15CA. Other documents like the legal heir certificate, will, death certificate and sale agreements also have to be furnished.
NRIs and OCIs may inherit agricultural properties from a Resident Indian. They may inherit the same from other NRIs as well, based on the special permission of the RBI and other specific regulations. OCIs or NRIs may get agricultural properties as gifts from resident Indians although they cannot receive the same from other NRIs in this category. NRIs may only gift properties to resident Indians in this category. Resident Indians may gift agricultural properties to NRIs and vice versa. However, gifting of these properties between NRIs is not allowed legally.
What to Ensure
Buying property is always a slightly complex affair when you’re an NRI. Get proper legal help and guidance from the right real estate platform before finalizing your transaction. NRIs cannot buy properties in the name of any other individual unless it is their spouse, descendant, lineal ascendant or their brother/sister.
Hence, buying property in someone else’s name is always illegal as per the provisions of the Benami Act. It is always best to steer clear of such transactions, no matter how tempting a property may be.
