Property: Purchase

Why an NRI cannot buy agricultural land or a farmhouse, and what you can do

You want to buy farmland or a farmhouse in India, or you already have, and you are unsure whether the law even allows it.

You would like to buy agricultural land, a farmhouse or a plantation in India, as an investment, for family, or to farm on a return. Or you have already bought one, and someone has told you an NRI is not allowed to. The exchange-control law is strict and often misunderstood here: an NRI or OCI simply cannot purchase these kinds of property, and the workaround people suggest, taking it as a gift, does not apply to farmland either. It is worth knowing exactly what is barred, the one route that is allowed, and how to regularise a purchase already made.

Request a free CA call

Last reviewed: 26 July 20267 min readReviewed by Preetesh Maloo, CA

The short answer

Under FEMA, an NRI or OCI cannot purchase agricultural land, a farmhouse or a plantation in India. Any other immovable property, a flat, a house, commercial space, is fine, but farmland is barred, and the gift route does not help because gifts to an NRI also exclude agricultural land. The only lawful way to acquire farmland is by inheritance. If you have already bought some, it is a contravention that can be regularised through RBI compounding, and inherited farmland can be sold, but only to a resident Indian.

Is this your situation? Get a senior CA on it.

Free 15-minute call. We tell you what applies to you and what it costs, then you decide. You stay abroad.

Senior CA who specialises in NRI tax · we deal with the tax officer, you don't

Chat with a CA on WhatsApp

Related situations

Farmland is barred, and gift does not help

The rule sits in the FEMA property regulations. An NRI or OCI may buy immovable property in India, but the permission is expressly for property other than agricultural land, a farmhouse or a plantation. So a flat, a house or commercial space is allowed, and farmland, a farmhouse or a plantation is not, whatever the funding.

The common workaround, taking the land as a gift from a resident relative, does not work here either. The gift permission is also written for property other than agricultural land, a farmhouse or a plantation, so those three cannot be gifted to an NRI any more than they can be bought. That leaves one lawful route to hold farmland as an NRI, and it is not a purchase.

Inheritance is the only lawful route

An NRI or OCI can acquire agricultural land, a farmhouse or a plantation by inheritance. You may inherit such property from a person resident in India, or from a person resident outside India who had themselves acquired it in line with the foreign-exchange law in force at the time.

So the farmland your parents owned in India can pass to you as an NRI on their death, and you can hold it. What you cannot do is add to it by buying more, or take a neighbour's plot as a gift. This is why so many NRIs end up owning ancestral farmland but hit a wall trying to buy any, the law lets it come to you by succession, not by purchase.

If you already bought, and selling inherited land

If you have already bought farmland as an NRI, it is a contravention of FEMA, but it can usually be regularised. The breach is penalised under Section 13, and it can be voluntarily compounded, settled by paying a penalty, through the RBI under Section 15, rather than left hanging. Note that compounding cures the exchange-control breach only; it does not fix a title problem under a State's land-ceiling or tenancy laws, and several States separately bar non-farmers from holding agricultural land, a second hurdle beyond FEMA.

When it comes to selling, whether inherited or otherwise held, agricultural land, a farmhouse or a plantation can be transferred by an NRI only to a person resident in India. You cannot sell it to another NRI, an OCI or a foreign buyer. A practising CA, with a FEMA lawyer where needed, handles the compounding application and structures a sale to a resident correctly.

What's involved

What the CA actually does

1
We tell you what you can and cannot hold
We confirm whether the property is agricultural, a farmhouse or a plantation, and so whether you can buy it at all or only inherit it.
2
We handle a purchase already made
Where you have already bought farmland, we prepare the RBI compounding application to regularise the FEMA breach, working with a FEMA lawyer where needed.
3
We structure a sale correctly
We make sure inherited farmland is sold only to a resident Indian, which the law requires, and handle the tax on the gain.
4
We check the State-law angle
We flag any State land-ceiling or non-farmer restriction that applies on top of FEMA, so a transaction is not undone later.

What to have ready

Documents you'll typically need

The property papers showing whether it is agricultural, farmhouse or plantation
How you acquired it, purchase or inheritance, with dates
Succession or inheritance documents, if inherited
Your OCI or passport and residency details

Your destination country can change the details

Requirements differ from one consulate, university and visa route to the next, how recent the figures must be, how long funds must have been held, and which certificates are mandatory. We assemble the documents around the exact checklist you're applying under. To see how India's tax treaty with your country of residence affects related filings, set your country below or compare all 46 countries.

References on this page

FEMA property regulations (Notification FEMA 21(R)/2018): NRI/OCI may buy any immovable property other than agricultural land, farmhouse or plantation
The gift route also excludes agricultural land, farmhouse and plantation, so inheritance is the only way to acquire farmland
A purchase in breach is a contravention, compoundable through RBI under FEMA Sections 13 and 15
Inherited agricultural land can be transferred only to a person resident in India

Frequently asked questions

Common questions

No. Under FEMA, an NRI or OCI cannot purchase agricultural land, a farmhouse or a plantation. Any other property, a flat, house or commercial space, is allowed, but farmland is barred regardless of how it is funded.

No. The gift permission also excludes agricultural land, a farmhouse and a plantation, so those cannot be gifted to an NRI either. The only lawful way to acquire farmland as an NRI is by inheritance.

It is a FEMA contravention, but it can usually be regularised by compounding through the RBI, settling it with a penalty under Sections 13 and 15. Compounding cures the exchange-control breach only, not a State land-law title issue, so it is worth acting rather than leaving it.

Yes, but only to a person resident in India. As an NRI you cannot sell agricultural land, a farmhouse or a plantation to another NRI, an OCI or a foreign buyer. A CA structures the sale and handles the tax on the gain.

The exceptions that change the answer

Where the general rule stops applying to you

Every rule below has a carve-out, a cut-off date or a condition that flips the answer. These are the ones that decide real cases.

Penalty for a FEMA contravention (s.13)

Right now: Up to three times the sum involved where it can be quantified; up to Rs 2 lakh where it cannot; and up to Rs 5,000 a day for a continuing contravention

Where it works differently

An NRI has an inadvertent contravention, such as running a resident savings account after becoming non-resident: These are civil, compoundable penalties, normally settled with the RBI for a modest fraction, not the three-times ceiling.; s.13 sets maximums; compounding under the FEMA rules resolves most inadvertent breaches.

Commonly got wrong

Any FEMA breach means a three-times penalty and confiscation. The 3x / Rs 2 lakh / Rs 5,000-a-day figures are the general s.13(1) maximums. The heavier confiscation limb sits in s.13(1A) to (1C) for undisclosed foreign assets.Treat the general s.13(1) penalty as a compoundable maximum; the undisclosed-foreign-asset limb is a separate, heavier sub-section.

If this matched your situation, these go further

Selling agricultural land that has become non-agricultural, as an NRI Buying property in India as an NRI, what FEMA allows and which TDS section applies Buying an Indian property jointly with a resident, and who really owns it Can your foreign spouse be on the deed of an Indian property NRI estate planning NRI ITR filing (we file for you)Repatriation unblock (15CA / 15CB)Capital gains calculator 15CA / 15CB filing

Farmland or a farmhouse in the picture?

Tell us whether you bought or inherited it. A practising CA will tell you where you stand under FEMA on a free call, no obligation.

Request a free CA call

No card, no obligation. All certification and filing work is handled by ICAI-registered practising Chartered Accountants.