Inheritance of agricultural land by NRIs

Indian Laws governing the investment opportunities by NRIs are governed by Foreign Exchange Management Act, 1999 (FEMA), according to which NRIs and PIOs in India (non-resident Indians and Persons of Indian Origin) are prohibited from buying agricultural land in India. Under the general permission granted by Reserve Bank of India, properties other than agricultural land, farm house and plantation property can be acquired by foreign citizen of Indian Origin provided the purchase consideration is met either out of inward remittance in foreign exchange through normal banking channels or out of funds from the purchaser’s NRE (Non Resident External Rupee Account) or FCNR ( Foreign Currency Account) accounts maintained with Indian banks. The reason relating to the prohibition clause, about agricultural land is mainly to protect farmers from foreign conglomerates looking to buying up agricultural land.

Indian NRIs cannot buy agricultural land in India and this is applicable to the whole of India. Approval is required from the Reserve bank of India which one can assume is not easily available and this would depend only on individual circumstances. In addition to that, some State Governments in India have rules that allow only farmers to buy agricultural land in their State and this restricts even Indian citizens from buying agricultural land unless they come from a family of farmers. Therefore, one cannot complain that due to the above prohibition, NRI investment options have been mitigated. On the other hand, NRIs who have acquired foreign citizenship, are sometimes mislead into believing that they cannot continue to hold agricultural land as foreigners cannot hold agricultural land in India. But this is not all encompassing, because Indian NRI’s can continue to hold agricultural land or any other property they own in India provided they had acquired them legally before accepting foreign citizenship. NRIs and Foreign Citizens of Indian Origin cannot acquire agricultural land, even by way of gift. However they can acquire agricultural land by way of inheritance and an agricultural property or land thus acquired can only be sold to a resident in India and not to an NRI.

Just like every cloud has a silver lining, therefore, even if it seems like there are a lot of obstacles involved in the process of inheriting an agricultural land as an NRI, but eventually, the initiative generates one of the biggest advantages eliminating the hurdle of paying any inheritance tax for NRIs. Also, NRIs can sell the inherited agricultural land to a resident Indian, but they will have to pay capital gains tax on the sale proceeds. Once the tax is paid the remaining sale proceeds can be remitted abroad which again should not exceed 1 million USD in any financial year. Therefore, these are a few attributes an NRI must keep in mind while deciding on investment strategies to the best of their suitability. Therefore, the conclusion lies in the fact that, inheritance of agricultural land is not covered by the ban on NRIs, but in fact it is an exception to the rule.

Source:- blogs.siliconindia.com

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