India’s real estate sector is a favorite destination for NRI investment — whether it's buying residential flats or selling ancestral land. However, one area that often confuses many NRIs is agricultural land. This blog serves as a complete legal guide for NRI property purchase in India, especially concerning agricultural land, and clarifies the laws, exceptions, inheritance rights, sale restrictions, and FEMA compliance. If you're a Non-Resident Indian (NRI) living in the USA and considering land investment in India, read this before you make a move.

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Why Are NRIs Restricted from Buying Agricultural Land in India?

As per the Foreign Exchange Management Act (FEMA), NRIs and OCIs (Overseas Citizens of India) are not permitted to purchase agricultural land, plantation property, or farmhouses in India, unless they obtain special permission from the Reserve Bank of India (RBI).

The Reason Behind the Restriction:

The restriction is to:

• Prevent speculative real estate development on agricultural land,

• Ensure land is used for its intended purpose: farming,

• Protect India’s agrarian economy and small farmers.

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Can NRIs Inherit Agricultural Land?

Yes. While NRIs cannot buy agricultural land in India, they can inherit it from:

• Resident Indians, such as parents or grandparents.

• Other NRIs, provided RBI permission is obtained.

This inherited land can be retained, gifted to a resident Indian, or sold — but only to an Indian citizen.

Important Note: The inherited agricultural land cannot be sold to another NRI or OCI. It can only be sold or gifted to a resident Indian.

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What If You’ve Already Purchased Agricultural Land?

Many NRIs unknowingly purchase agricultural land, unaware of FEMA restrictions. If this has happened:

• Avoid speculative use (like subdividing into plots).

• Seek professional legal advice immediately.

• Consider gifting the land to a resident Indian family member.

• Alternatively, transfer the property to a public charitable trust managed by residents.

This avoids future FEMA violations and legal complications such as land confiscation or penalties.

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Can NRIs Get RBI Approval to Buy Agricultural Land?

Yes — but it’s rare. An NRI or foreign national who wants to acquire agricultural land, farmhouse, or plantation property must write to:

Chief General Manager, RBI
The request must include:

• Purpose of acquisition (non-speculative),

• Source of funds (NRE/NRO account or foreign remittance),

• Details of land use and non-commercial intent,

• Declaration that land won’t be sold for at least two years.

But approval is discretionary and rarely granted unless there's a strong agricultural link (e.g., you're a farmer by lineage).

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Selling Agricultural Land in India as an NRI

NRIs and OCIs can sell inherited agricultural land only to resident Indians. If the land was acquired via RBI permission, selling it requires approval as well.

Key Compliance Points:

• Sale proceeds must be deposited into your NRO account.

• Repatriation is allowed up to USD 1 million per financial year, post-tax.

• You must file Form 15CA and 15CB for remittance.

• You must provide documentary proof of inheritance and sale.

Keywords Integrated: selling property in India, property selling guide India, repatriation from NRO

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Taxation on Sale of Agricultural Land by NRIs

Tax implications vary depending on whether the agricultural land is urban or rural.

• Rural Agricultural Land: Not treated as a capital asset. No capital gains tax.

• Urban Agricultural Land: Treated as a capital asset. Subject to capital gains tax:

  • Long-Term (held >2 years): 20% tax with indexation

  • Short-Term: Taxed as per income slab

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Gifting Agricultural Land: Who Can Gift to Whom?

Here's a summary of FEMA guidelines on gifting agricultural land:

NRIs can receive agricultural land as a gift from a resident Indian, but cannot gift it to another NRI or OCI. All transactions should comply with Benami Property Act regulations.

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Benami Transactions Act: Caution for NRIs

Buying land in someone else’s name (unless they are your spouse or close relative) can be prosecuted under the Benami Transactions (Prohibition) Act. Always register property in your own name and declare it appropriately in Indian and foreign tax filings.

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What Documents Should NRIs Check Before Buying Land in India?

For any land transaction (even residential), the following documents are mandatory:

1. Mother Deed (original ownership)

2. Title Deed

3. Encumbrance Certificate

4. Revenue Records

5. Zoning Classification (ensure land is not agricultural)

6. Sale Agreement

7. PoA (if transacted through representative)

A real estate lawyer is highly recommended to verify each document and ensure full compliance.

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State-Specific Rules and Agricultural Land

Land laws in India are state-specific. In some states like Maharashtra, Gujarat, or Karnataka, even resident Indians must prove farmer status to buy agricultural land.

Farmer Status Requirements May Include:

• Evidence of family owning agricultural land

• Proof of working as an agricultural laborer

• A formal farmer certificate

So, even Indian citizens from non-farming backgrounds may face difficulty, let alone NRIs.

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Final Thoughts: Be Legally Compliant and Smart

Buying or selling agricultural land as an NRI is highly regulated, unlike regular property transactions. If you’re considering agricultural land for investment or retirement, be mindful of legal restrictions and FEMA rules. Avoid shortcuts or Benami arrangements — they could lead to serious legal issues.

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Why Choose India for NRI for Property Guidance?

At India for NRI, we provide comprehensive advisory and end-to-end solutions for:

• NRI property purchase in India

• Inheritance of land and succession planning

• Property sale compliance and taxation

• Repatriation support

• Power of Attorney documentation

• Legal verification and land due diligence

Whether you are selling property in India or planning to buy land, our legal experts help you navigate every step smoothly and in compliance with FEMA, RBI, and state laws.