Should I buy land from an NRI who stays in India?

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

Ans: Your NRI status depends on the number of days spent in India. If you stay between 120 and 183 days, you typically remain an NRI, especially if your income in India exceeds Rs 15 lakh. As an NRI, your global income is not taxable in India, but your investments in equity, mutual funds, and AIFs are subject to Indian taxes.

For equity, LTCG over Rs 1.25 lakh is taxed at 12.5%, and STCG at 25%. Debt mutual funds' CG is taxed as per your slab rate. AIFs' taxation depends on their category.

Monitor your days in India to maintain NRI status and avoid becoming a Resident, which would increase your tax liability.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in