Can NRIs Buy Agricultural Land in Karnataka? A 2026 Legal Explainer

Quick Answer

No. As of 2026, Non-Resident Indians (NRIs) and Overseas Citizens of India (OCI) cardholders cannot directly purchase agricultural land, plantation property, or farmhouses in Karnataka. This restriction is set by the Reserve Bank of India under the^[1] and is codified in the^[2]. The prohibition applies nationally and is not overridden by Karnataka's 2020 amendment that opened farmland to resident non-agriculturists (^[3]). NRIs can still acquire agricultural land in Karnataka through three legal routes: inheritance from a resident Indian, gift from a resident Indian relative, or land already owned before becoming an NRI. Direct purchase carries penalties of up to three times the transaction value under Section 13 of FEMA, plus property confiscation by the Enforcement Directorate.

TL;DR

• Direct purchase is barred. NRIs and OCIs cannot buy agricultural land, plantation property, or farmhouses anywhere in India, including Karnataka, under FEMA 1999.

• Karnataka's 2020 reform does not help NRIs. The repeal of Sections 79A, 79B, and 79C of the Karnataka Land Reforms Act opened farmland to resident non-agriculturists. The FEMA prohibition on NRIs and OCIs operates separately and was not affected.

• Three legal acquisition routes remain: inheritance, gift from a resident Indian relative as defined under the Companies Act 2013, and continued holding of land acquired while still a resident.

• Penalties are severe. Up to three times the purchase price plus confiscation. A 2024 Delhi High Court case enforced a ₹41.04 lakh penalty on a ₹13.68 lakh agricultural land purchase by an OCI cardholder.

• Converted (non-agricultural) plots are fully permitted. Once land use has been formally converted under Section 95 of the Karnataka Land Revenue Act and recorded in revenue documents, it falls outside the FEMA bar.

• Sale of inherited agricultural land can only be made to a resident Indian citizen. Sale proceeds are subject to USD 1 million per financial year repatriation cap from the NRO account.

The Legal Hierarchy: FEMA Beats State Law

NRI eligibility to buy agricultural land is governed by central law, not state law. The Foreign Exchange Management Act, 1999 is administered by the Reserve Bank of India through the operative RBI Master Direction No. 12/2015-16, most recently re-issued on 1 September 2022.

Paragraph 3 of this Master Direction states that an NRI can acquire any immovable property in India "other than agricultural land, plantation property, or farm house." Paragraph 4 applies the same restriction to OCI cardholders. The prohibition is absolute and does not depend on the size of the parcel, the intended use, or the source of funds.

Karnataka separately liberalised its own land laws in 2020. The Karnataka Land Reforms (Amendment) Act, 2020 repealed Sections 79A, 79B, and 79C of the Karnataka Land Reforms Act, 1961. The amendment removed the bar on non-agriculturists buying farmland inside Karnataka and lifted the previous income ceiling that capped buyers at ₹25 lakh of annual non-agricultural income.

This state-level reform changed who qualifies as a permitted buyer under Karnataka law. It did not, and could not, override the parallel FEMA prohibition that applies to NRIs and OCIs nationally. In effect: a salaried professional in Bengaluru can now buy farmland in Tumakuru. An NRI cousin sitting in Dubai still cannot.

What Counts as "Agricultural Land" Under FEMA

FEMA does not define agricultural land in granular detail. In practice, banks, sub-registrars, and the RBI treat the term to cover any parcel classified as agricultural in the relevant revenue records.

In Karnataka, this means any plot recorded as agricultural in the^[4], which maintains the Record of Rights, Tenancy and Crops for every survey number in the state. Plantation property covering coffee, tea, rubber, and cardamom estates is also caught by the prohibition, as are farmhouses built on agricultural land that has not been converted.

The decisive factor is the land use entry in the revenue document, not the appearance of the land or how the seller describes it. A 5-acre stretch of empty grassland with a boundary wall and a gate is still agricultural land if the RTC says so. A built-up plot with paved roads and water connections is non-agricultural if the conversion order has been issued and recorded.

Where the land has been formally converted to non-agricultural use under Section 95 of the Karnataka Land Revenue Act, 1964, and revenue records reflect that conversion, the parcel falls outside the FEMA prohibition. An NRI can buy converted residential, commercial, or industrial land in Karnataka in their own name without any RBI permission.

This conversion distinction is the entire framework. The label on the title document, not the look of the land, decides eligibility.

The Three Legal Routes for NRIs

An NRI cannot purchase agricultural land outright, but three legal pathways remain open under FEMA.

Inheritance. An NRI or OCI can inherit agricultural land in Karnataka from any person resident in India, or from another non-resident who acquired the property legally under earlier foreign exchange rules. This is confirmed in the^[5], Question 11. Inherited land can be retained, used, or sold, but it can only be sold onward to a resident Indian citizen.

Gift from a Resident Indian Relative. Agricultural land can be gifted to an NRI by a resident Indian who qualifies as a "relative" under Section 2(77) of the^[6]. The relationship is narrowly defined and includes spouse, parents, siblings, and lineal descendants. Cousins, in-laws beyond the immediate definition, and unrelated parties cannot make such a gift, even if the title is otherwise clean.

Acquisition Before NRI Status. Land bought when the individual was a resident Indian continues to be held legally even after they become an NRI. The change of residency status does not trigger forced divestment. This route is the most common in practice for NRIs who emigrated after working in India and held farmland during their resident years.

A request for special permission under Section 6(3) of FEMA is theoretically possible, but the RBI has historically rejected applications for direct NRI purchase of agricultural land. Practitioners do not treat it as a viable route.

The Cost of Getting It Wrong

Under Section 13 of FEMA, the penalty for contravention can extend to three times the transaction value of the property, plus confiscation by the Enforcement Directorate. This is not a theoretical risk.

A 2024 Delhi High Court decision involving an OCI cardholder who purchased agricultural land for ₹13.68 lakh resulted in a penalty of ₹41.04 lakh, three times the purchase price, even after the buyer cooperated and ultimately sold the land back to a resident (^[7]). The case has become the standard reference point for FEMA practitioners advising NRI clients on agricultural land.

The structural workaround that most often gets attempted, buying agricultural land in the name of a resident relative while the NRI provides the funds, is itself prohibited. The Enforcement Directorate treats such arrangements as benami transactions under the^[8], with separate confiscation powers and criminal liability that runs in parallel with the FEMA action.

Tax and Repatriation When an NRI Sells

When an NRI sells inherited or gifted agricultural land in Karnataka, three tax and FEMA layers apply.

Long-term capital gains (holding period over 24 months) on immovable property are taxed at 12.5% without indexation, effective Budget 2024-25. Short-term gains are taxed at the NRI's slab rate. The buyer must deduct TDS at the applicable non-resident rate under^[9], now replaced by the Income Tax Act, 2025 with effect from 1 April 2026.

Inherited agricultural land can only be sold to a resident Indian citizen. It cannot be transferred to another NRI, an OCI, or a foreign company.

Sale proceeds must first be deposited into a Non-Resident Ordinary (NRO) account. From there, the NRI can repatriate up to USD 1 million per financial year, subject to filing Form 15CA and obtaining a Chartered Accountant's certificate in Form 15CB. Amounts above USD 1 million in a single financial year require specific RBI approval (^[10]).

How NRIs Legitimately Participate in the Karnataka Farmland Market

The market response to the FEMA prohibition has produced several legal structures. None of them allow direct purchase of agricultural land, but each lets an NRI gain meaningful exposure to the asset class.

Converted plotted developments are the cleanest route. Where a developer has already completed land conversion, secured plan sanctions, and registered the layout as non-agricultural, an NRI can buy a plot in their own name without RBI permission. Agrocorp Landbase operates in this segment along the NH44 Bangalore-Hyderabad corridor, with projects like Central Vista Farms marketed as managed farm communities. The developer's legal team handles the eligibility verification and structuring for each buyer based on residency status, which removes the FEMA navigation burden from the individual NRI.

Family-held arrangements remain common. Land is held in the name of a resident parent, sibling, or spouse, with the NRI participating informally through family decisions rather than legal ownership. This is FEMA-clean only when the funds genuinely come from the resident relative and the NRI has no financial interest in the title. The moment the NRI funds the purchase or controls the asset economically, the benami risk activates.

Lease arrangements of up to five years are exempt from FEMA's acquisition rules. An NRI cannot purchase agricultural land but can lease it for use, subject to Karnataka's tenancy laws. This route is rarely used for personal lifestyle purposes but has commercial applications in agribusiness.

Investing through an Indian-incorporated company that owns farmland is technically possible but governed by FEMA's Non-Debt Instrument Rules, 2019, and is subject to sectoral caps and reporting requirements. For most individual NRI investors, the corporate route adds complexity disproportionate to the benefit.

What an NRI Should Do Before Any Karnataka Land Purchase

The diligence sequence for any NRI considering Karnataka land follows a predictable order, and skipping a step is what triggers most of the post-transaction trouble.

First, verify residency status under Section 6 of the^[11]. The 182-day physical presence test in the relevant financial year is the gating question. If you are an NRI or OCI, the FEMA agricultural prohibition applies regardless of how Indian your other documentation feels.

Second, pull the latest RTC extract from the Bhoomi portal. The land use column is the decisive entry. If it shows "agricultural," FEMA prohibits direct purchase. If conversion has been completed, request a copy of the conversion order and verify it against the RTC.

Third, confirm the title chain through the^[12], Karnataka's official property registration and encumbrance database. An encumbrance certificate covering at least 30 years is the working standard for serious diligence in the state.

Fourth, route every payment through banking channels. NRE, NRO, and FCNR accounts are the permitted funding sources. Cash payments and traveller's cheques are prohibited under FEMA and create automatic compliance problems regardless of the property type.

Fifth, register the Power of Attorney properly if remote execution is required. The PoA must be specific to the property acquisition, registered in India, and apostilled or notarised in the country of residence. A general PoA does not satisfy sub-registrar requirements in Karnataka.

Sixth, retain the sale deed, payment receipts, bank statements, and FEMA-related forms for at least 10 years. Tax assessments and FEMA queries can both arise long after the transaction, and the document trail is the only defence.

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