NRI Guide: Farmland in Karnataka & TN

You have USD 150,000 in a NRE account. The problem: you are an NRI. The rules are different.

This guide covers everything an NRI needs to know before buying agricultural land in Karnataka or Tamil Nadu. FEMA restrictions, TDS on sales, capital gains calculations, and income repatriation — all in one place. Updated for 2026 RBI and FEMA rules.

If at any point this feels overwhelming — it is a genuinely complex process — skip to the FAQ section or message us on WhatsApp.

1. Can NRIs and OCIs Buy Agricultural Land in India?

The short answer: Not directly. Under FEMA and the RBI's consolidated FDI Policy, Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs) are prohibited from purchasing agricultural land, plantation property (including tea and coffee plantations), and farmhouses in India.

This restriction covers:

• Non-Resident Indian (NRI): An Indian citizen who is not resident in India (stays abroad for employment, business, or any other purpose indicating intention to stay abroad)
• Overseas Citizen of India (OCI): A person holding a valid OCI card issued under the Citizenship Act, 1955
• Person of Indian Origin (PIO): Citizens of specified countries who at any time held Indian passports, or whose parents/grandparents were Indian citizens — also subject to similar restrictions

The restrictions apply to the entity that appears on the title — whether an individual, a Hindu Undivided Family (HUF), or a company. If an NRI is a shareholder in a private limited company that owns agricultural land, FEMA scrutiny applies to the company's shareholding structure as well.

What NRIs CAN do: Inherit agricultural land (no restriction on receiving inherited property), purchase land if they return to India and become resident (subject to subsequent restrictions if they re-become NRI), or invest in agricultural land through government-approved channels such as agricultural mutual funds or the agriculture infrastructure fund.

2. Income Repatriation Rules for NRI Farmland Owners

Two types of income flow from agricultural land: rental/lease income from agricultural operations, and capital appreciation when the land is sold. The repatriation rules differ for each.

Agricultural Income Repatriation

Agricultural income earned in India by an NRI is generally exempt from Income Tax under Section 10(1) of the Income Tax Act, 1961.

The RBI's Liberalised Remittance Scheme (LRS) — which allows Indian residents to remit up to USD 250,000 per financial year abroad — does not apply to NRIs; NRIs remit from NRO accounts under a separate RBI limit of up to USD 1 million per financial year. However, for substantial remittances, the bank may seek additional documentation. Working with a banker who understands NRI agricultural income repatriation is important.

3. TDS and Capital Gains Tax for NRI Farmland Sellers

Understanding the TDS and capital gains framework from the beginning affects your purchase decision and your holding period strategy.

TDS on NRI Property Sales (Section 195)

When an NRI sells property in India, the buyer is legally required to deduct TDS (Tax Deducted at Source) before making the payment. The TDS depends on how long the land was held:

• Long-term capital gains (land held for more than 2 years): TDS under Section 195 at the current capital-gains rates; confirm with a chartered accountant (CA)
• Short-term capital gains (land held for 2 years or less): TDS under Section 195 at the rates in force; confirm with a CA

For example: the taxable gain is worked out from the sale price and your recorded cost of acquisition, so a CA needs your full purchase records to compute it correctly. This is why maintaining purchase records is critical.

Lower TDS Certificate (Form 13)

If the seller believes the tax on their capital gains will be lower than the TDS the buyer would otherwise deduct (for example, where a reinvestment exemption such as Section 54F may apply; check with a CA), they can apply to the Income Tax Department for a Lower TDS Certificate (Form 13). This certificate instructs the buyer to deduct a lower percentage.

Apply well before the sale, as processing takes time; a CA can compute the expected capital gains and file the application. Getting this certificate before initiating the sale process is one of the most valuable things an NRI seller can do — it means more money in hand at the time of sale.

Agricultural Income Tax Exemption (Section 10(1))

Note: The Section 10(1) agricultural income tax exemption applies to the income earned from agricultural operations — not to capital gains on the sale of land. Rural agricultural land is generally not a capital asset under Section 2(14); urban agricultural land can be, and capital gains tax then applies to any appreciation. Confirm with a CA. The agricultural income exemption does not apply to capital gains.

4. Karnataka vs. Tamil Nadu for NRI Farmland Investment

Both Karnataka and Tamil Nadu have attracted NRI farmland investment, but the legal landscape differs significantly.

Karnataka: Repeal of Sections 79A/79B (2020)

Karnataka's Land Reforms Act Sections 79A and 79B — which restricted non-agriculturists from buying farmland — were repealed in 2020. This means any Indian citizen, regardless of profession or income source, can now purchase agricultural land in Karnataka. The 2020 change makes Karnataka cleaner for resident Indian buyers and does not change the NRI-specific FEMA restrictions.

Karnataka's key documents: RTC (Record of Rights, Tenancy and Crop Information), Pahani (field map and classification), Akarband/Tippan (survey sketch), 15-year Encumbrance Certificate from the local SRO.

Tamil Nadu: No Non-Agriculturist Restrictions

Tamil Nadu has never had restrictions on non-agriculturists purchasing agricultural land. The state's land laws under the Tamil Nadu Land Reforms Act are relatively straightforward — the ceiling limit of 15 Standard Acres applies, but most 1-acre buyers are unaffected. This makes the legal verification process simpler for our managed farmland projects in Thalli, Tamil Nadu.

Tamil Nadu's key documents: Patta (ownership record), Chitta (land extent), Adangal (cultivation history), 30-year Encumbrance Certificate from the Sub-Registrar's office. The 30-year EC period for TN is longer than the 15-year standard for urban property — a point many buyers miss.

Which State is Better for NRI Investment?

From a pure FEMA standpoint, both states are equivalent for NRI investors (neither allows direct NRI purchase). From a practical standpoint, Tamil Nadu is where The One Acre Farms' completed projects near Thalli (Hilltop, Lakeside, Country Side, Misty Valley) are.