NRIs/foreign nationals of Indian origin can acquire agricultural land only by way of inheritance.
Many State governments in India now allow only farmers to purchase agricultural land. The purpose being to protect farmland.
Non farmers are in the market to purchase agricultural land, normally with the idea of not farming, but with the intent of purchasing cheap land for commercial purposes.
The government of India also exempts agricultural income from taxes in most cases.
This allows those who own even a small piece of agricultural land, which may have no income, to claim income generated from other avenues as being agricultural income, to avoid taxes
Acquisition of immovable property in India by persons resident outside India (foreign national) is regulated in terms of section 6 (3) (i) of the Foreign Exchange Management Act (FEMA), 1999. Under FEMA, residential status is determined by operation of law. The onus is on an individual to prove his / her residential status, if questioned by any authority.
In terms of the provisions of Section 6(5) of FEMA 1999, a person resident outside India can hold, own, transfer or invest in Indian currency, security or any immovable property situated in India if such currency, security or property was acquired, held or owned by such person when he was a resident in India or inherited from a person who was a resident in India.
The regulations under Notification No. FEMA 21/2000-RB dated May 3, 2000, as amended from time to time, permit a NRI or a PIO to acquire immovable property in India, other than agricultural land or, plantation property or farm house.
NRIs and PIOs can freely acquire immovable property by way of gift either from
i) a person resident in India; or
ii) an NRI; or
iii) a PIO.
However, the property can only be commercial or residential in nature. Agricultural land / plantation property / farm house in India cannot be acquired by way of gift.