Q648. Parents purchasing property in India for NRI children

Question: Good morning, I am a physician in USA. I am an Indian citizen and have an opportunity to get US citizenship so I am weighing the pro and cons of giving up my Indian citizenship. One of my investment plans for future were to buy apple orchards in Himachal (my home state) which my parents could take care of (they have no intentions of coming to US). I know from your website that as OCI (US citizen) I would not be able to buy agricultural land although I could inherit it from my parents. Could I inherit those orchards from my parents even if I helped them to buy them with my money in the first place ??? I came across this on RBI website "However, the person from whom the property is inherited should have acquired the same in accordance with the foreign exchange law in force or FEMA regulations, applicable at the time of acquisition of the property". Would my parents have acquired the orchards in violation of the FEMA regulation (abovementioned law) if they buy it with my money - because in that case they would not be legally allowed to bequeath them to me. In other words would it be legal for my parents to bequeath to me orchards that they bought with the money that I remiited to them ? Wont that be sort of cheating ? Thank you. Regards. Dr Verma

Answer: The way you describe it, if money is sent with instructions to purchase certain property to circumvent current laws of property ownership, then it would look as you mention in your email, like cheating! On the other hand, Fema Act and rules have no restrictions on NRIs gifting money from abroad to their relatives, non-relatives or friends in India as long as the transactions are done through legal banking channels. Regardless of the amount of money received in India from abroad as a gift, Relatives who receive such money are exempt from tax in India under The Indian Income Tax Act, 1961. Non-relatives are allowed an exemption of up to Rupees 50,000 in aggregate in one financial year. As long as a PIO/NRI sends money to his/her parents through legal banking channels there are no legal implications. What parents do with the money once they get it becomes their business. Any assets they accumulate they could bequeath as per their wishes. NRIs as well as foreign nationals can acquire agricultural land by way of inheritance.