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Karnataka Relaxes Agricultural Land Conversion for Small Industries
1. The NRI Interest in Farmland
Many NRIs dream of owning agricultural land or a farmhouse in India.
However, farmland ownership for NRIs is legally restricted and needs careful compliance.
2. What NRIs Cannot Buy
Direct Purchase Restrictions (FEMA Rules)
NRIs/OCIs cannot directly purchase the following:
- Agricultural land
- Plantation property
- Farmhouses
3. Why This Restriction Exists
FEMA and RBI regulations classify agricultural land as restricted property for foreign persons.
Buying without compliance can lead to:
- Penalties
- Land being declared illegal possession
- Enforcement actions
4. What NRIs Can Acquire Legally
1. Inherited Property
NRIs can inherit agricultural/plantation land or a farmhouse.
Inheritance is a fully legal and common way for NRIs to own agricultural land.
2. Receiving Land as a Gift
NRIs can receive agricultural land as a gift from a resident Indian relative.
But they cannot gift agricultural land to another NRI or OCI.
5. Buying Agricultural Land With RBI Permission
- Agricultural land
- Plantation property
- A farmhouse
Applications must be submitted to the RBI Exchange Control Department (Foreign Investment Division), Mumbai.
Approval is not guaranteed; it is granted case-by-case.
6. Key Documents Required
Before proceeding, NRIs must collect:
- Mother Deed / Title Deeds
- Personal documents (passport, OCI/PIO card, visa status)
- Evidence of inheritance/gift deed, if applicable
- Source of funds documentation
- Declarations required under state laws
- RBI permission documents, if approval is sought
7. Gift & Benami Law Restrictions
Gifting Rules
Allowed: Resident Indian → NRI (gift of agricultural land)
Not allowed: NRI → NRI/OCI (gift of agricultural land)
Benami Transactions Act
NRIs cannot buy land in someone else’s name, except:
- Spouse
- Sibling
- Parent
- Child
Violating this can lead to property confiscation and penalties.
8. Selling Agricultural Land as an NRI
If the Land Was Inherited
NRIs can sell inherited agricultural land, but with conditions:
- Sale is usually allowed only to a resident Indian.
- The sale amount must be credited to an NRO account.
- Repatriation (sending money abroad) is allowed up to USD 1 million per financial year, after:
- Paying taxes
- Filing forms 15CA & 15CB
9. Tax Rules Explained
Urban vs Rural Agricultural Land
- Rural agricultural land
- Not considered a capital asset → may attract no capital gains tax.
- Urban agricultural land
10. State-Level Land Laws
Land rules differ across states — some require you to be a registered farmer.
Even with RBI permission, state regulations may stop or delay agricultural land purchase.
Certain states only allow purchase if:
- You already own agricultural land
- You have farmer ancestry
- You meet specific local criteria
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