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PremiumUnder the exchange control law, non-resident Indians or foreign passport holders are prohibited to acquire agricultural land in India
I am an Overseas Citizen Of India (OCI) cardholder and received a few acres of agricultural land from my parents who are Indian residents/citizens. Can I hold this property and pass it on to my two children (one was born in India and the other in the US) who are US citizens and OCI cardholders? Can they retain this property for their lifetime if they want it? If I sell this property, how should I report this sale in my US tax returns? Also, do I need to pay any tax in India from the sale?
—Name withheld on request
Under the exchange control law, non-resident Indians or foreign passport holders are prohibited to acquire agricultural land in India. However, as an exception, a non-resident Indian or an OCI cardholder can acquire any immovable property in India (including agricultural land) by way of inheritance from a person resident in India or from a person resident outside India who had acquired the property in accordance with the provisions of the exchange control law in force at the time of acquisition.
Accordingly, as an OCI, you may inherit the agricultural land from your parents who are persons resident in India. Similarly, your children may inherit the agricultural land in India from you as a person resident outside India who had acquired the property in accordance with the provisions of the exchange control law in force at the time of acquisition. However, you or your children will be able to transfer such agricultural land only to a person resident in India.
Under the income-tax law, there is no income-tax levied on inheritance and sale of agricultural land in India unless the agricultural land is situated in or within specified distance from urban areas. However, such a sale may be taxable in the US as per the tax laws of the US.
Sonu Iyer is tax partner and people advisory services leader, EY India.
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