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Can I, an NRI, buy agricultural land using my spouse's name in India?

Ramalingam Kalirajan |10881 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Aug 23, 2024

Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more

Asked by Anonymous - Jan 28, 2024Hindi

As a NRI can I buy agricultural land in my spouce’s name( in India). My spouse is a resident and has no independent source of income.

Ans: As an NRI, you must know that Indian laws regarding land ownership are very specific. The Foreign Exchange Management Act (FEMA) regulates land ownership by NRIs. According to FEMA, NRIs cannot purchase agricultural land, plantation property, or farmhouses in India.

Buying Land in Your Spouse’s Name
Your spouse, being an Indian resident, can legally purchase agricultural land. However, there are important factors to consider:

Source of Funds: The funds used to purchase the land should come from your spouse's income or resources. Since your spouse has no independent income, it could raise questions if the money comes from your account.

Gift or Loan: You could consider gifting the amount to your spouse. Gifts between spouses are tax-free in India. However, this should be done transparently to avoid any legal complications.

Income Tax Implications: If the land generates any income (like farming income), it may be attributed to you since you provided the funds. This could have tax implications under the clubbing provisions of the Income Tax Act.

Alternative Investment Options
Given the legal limitations for NRIs in purchasing agricultural land, you might want to consider other investment options. These alternatives offer potential for growth and stability without the legal complexities.

Mutual Funds
Equity Mutual Funds: These are ideal for long-term wealth creation. They invest in stocks, offering higher returns over time.

Debt Mutual Funds: If you prefer stability, debt funds invest in fixed-income securities. They provide moderate returns with lower risk.

Hybrid Mutual Funds: These funds offer a balance between equity and debt, aiming to provide steady returns.

Non-Resident External (NRE) and Non-Resident Ordinary (NRO) Accounts
NRE Fixed Deposits: These offer attractive interest rates and are tax-free in India. They can be repatriated fully.

NRO Fixed Deposits: These are suitable if you have income in India. Interest earned is taxable, but funds can be partially repatriated.

Real Estate Investment Trusts (REITs)
REITs: Instead of directly buying property, you can invest in REITs. They allow you to earn returns from real estate without the need to manage property.
Ensuring Financial Transparency
It is crucial to maintain transparency in your financial dealings. Ensure that any transaction between you and your spouse is well-documented. This will help avoid any legal or tax-related issues in the future.

Final Insights
While your spouse can purchase agricultural land as a resident, using your funds for this purpose can complicate things. Considering the legal and tax implications, it might be wiser to explore alternative investment options. Mutual funds, NRE/NRO accounts, and REITs offer potential for growth and stability without the legal hassles associated with land ownership for NRIs.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.