1. The basic FEMA rule — buying is barred
Direct answer: under the Foreign Exchange Management (Non-debt Instruments) Rules, NRIs and OCIs are not permitted to purchase agricultural land, plantation property or farmhouses in India. The bar applies regardless of how the funds are routed — NRE, NRO, FCNR or inward remittance — and regardless of which state the land is in.
The restriction covers the asset class, not the source of money. A purchase deed registered in an NRI's name on agricultural land is open to challenge by the RBI and the state revenue authorities, and many sub-registrars now refuse to register such transactions outright. Residential and commercial property, by contrast, can be freely purchased by NRIs/OCIs. The line between "agricultural" and "non-agricultural" is set by the state's land-revenue records, not by current use — land classified as agricultural in the records cannot be bought by an NRI even if it sits inside a city. See our OCI & FEMA hub for the wider framework on what NRIs can and cannot own.
2. Inheriting agricultural land as an NRI
Direct answer:inheritance is the recognised exception. An NRI or OCI can inherit agricultural land, plantation property or a farmhouse from a person resident in India, and may continue to hold it indefinitely. Inheritance from another non-resident is also possible but requires the property itself to have been acquired in accordance with FEMA when originally bought.
Practically, this means farmland that comes through a parent's will or by intestate succession sits validly in the NRI's name, gets recorded in the village/revenue records ("mutation"), and can be held, leased or cultivated through arrangements permissible under the state's tenancy laws. Keep the chain of title clean — succession certificate or probate, mutation entries, and a clear khata/patta in the NRI heir's name — because the same documentation will be needed at sale.
3. Can an NRI receive farmland as a gift?
Direct answer: no. A gift of agricultural land, plantation property or a farmhouse to an NRI or OCI is not permitted under FEMA, even from a close relative. This is one of the most commonly misunderstood corners of NRI property law.
The relative exemption under the Income-tax Act, which makes gifts between close relatives tax-free, has nothing to say about FEMA — it only governs taxability if the gift is otherwise lawful. Where a family wants to pass farmland to an NRI heir, the route is inheritance (will or succession), not a lifetime gift. A gift deed of agricultural land in favour of an NRI is liable to be treated as a contravention of FEMA, with compounding and unwinding consequences.
4. Selling inherited agricultural land — who can buy
Direct answer: an NRI can sell inherited agricultural land, but only to a person resident in India who is otherwise eligible under the relevant state law to hold agricultural land. A sale to another NRI, OCI or foreign national is not permitted.
Many states layer their own conditions on top of FEMA — a ceiling on holdings, a requirement that the buyer be an agriculturist by occupation (Maharashtra, Karnataka, Gujarat in particular), or state-government permission for certain transfers. Plan the sale around those rules: get mutation completed in the NRI's name first, obtain any required NOC from the revenue authority, and route the consideration through the NRI's NRO account. Power of attorney to a trusted relative in India is the usual mechanism where the NRI cannot travel for registration.
5. Capital gains and repatriation on the sale
Direct answer:capital-gains tax depends on whether the land is "rural agricultural land" (outside the statutory municipal limits) — that is exempt from capital-gains tax — or "urban agricultural land" inside those limits, which is taxable like any other immovable property. Repatriation of the net proceeds out of India is then subject to the standard NRO limit of USD 1 million per financial year with Form 15CA/CB and bank clearance.
Rural agricultural land is not a "capital asset" under the Income-tax Act, so the gain is outside the charge of tax altogether — but the buyer's TDS obligation and the FEMA repatriation route still apply, and the position must be documented (distance from municipal limits, population certificate) to defend it. Urban agricultural land is taxed at 20% long-term with indexation (12.5% without, under the post-July-2024 regime where opted), and Section 54B reinvestment relief can apply if the seller (or a parent for inherited holdings) used the land for agriculture in the two years before sale. For the full mechanics of moving sale proceeds out of India, see our property repatriation guide, and align the inheritance side with our succession & estate planning hub.