Under FEMA, NRIs are generally barred from purchasing agricultural land, plantation property, or a farmhouse in India — one of the few hard purchase restrictions in an otherwise fairly open property market for NRIs. Inheritance is the well-established exception: an NRI can inherit such property from a resident (or from another person who lawfully acquired it), and once inherited, the question shifts from "can I own this" to "what can I do with it," which turns out to have its own restrictions.
Who you're actually allowed to sell it to
The consistent guidance across FEMA-focused sources is that an NRI holding inherited agricultural land, a farmhouse, or plantation property can generally only sell it to a person resident in India who is also an Indian citizen — not to another NRI, an OCI, or a foreign national. On top of that national-level restriction, agricultural land is also a state subject, and several states layer on their own buyer-eligibility rules — for example, sources describe Maharashtra and Gujarat as generally requiring the buyer to already be a recognized "agriculturist," while Karnataka's rules were reportedly loosened by a 2020 amendment. Given how much this varies by state and how often state land laws change, confirm the current rule for the specific state where the property sits before assuming a buyer is eligible — this is not a one-size-fits-all national rule.
Whether the gain is even taxable — the rural/urban line
This is the detail that surprises the most sellers: India's capital-gains regime doesn't treat all agricultural land the same way. Land classified as "rural" agricultural land under Section 2(14)(iii) of the Income-tax Act generally isn't treated as a "capital asset" at all, which means its sale is generally described as falling outside capital gains tax entirely — a meaningfully different outcome from every other property type this site covers. "Rural" here is a location test, not a land-use test: sources describe it as based on distance from, and the population of, the nearest municipality (commonly cited thresholds include land outside all municipal limits, or within a municipality of 10,000 or fewer people, plus a tiered aerial-distance test running up to roughly 8 km for land near the largest cities) — not on whether the land is actually farmed. A fully cultivated plot can be "urban" for this purpose if it sits inside the wrong municipal boundary, and a barren plot can be "rural" if it sits outside one.
Land that falls on the "urban" side of that line is a capital asset like any other, taxed as LTCG or STCG depending on the holding period, under the same post-Budget-2024 flat-rate regime (and the same indexation-removal question) covered elsewhere on this site. Given how specific and change-prone the rural/urban thresholds are, treat the specific numbers here as a starting point for verification against current statutory text — not as settled fact to rely on directly.
Getting the proceeds out
Sale proceeds from inherited agricultural property go into an NRO account like any other India-sourced sale, subject to the same general repatriation ceiling and documentation covered in our repatriation article — there's no separate, more generous repatriation carve-out for agricultural land specifically, as far as available sources indicate.