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Business News/ Money / Personal Finance/  I want to buy land. Implications if there is a change in residential status
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I want to buy land. Implications if there is a change in residential status

The rules governing investments in India by non-residents are governed by FEMA

A person will become a non-resident the moment he leaves India to take up an employment outside India.Premium
A person will become a non-resident the moment he leaves India to take up an employment outside India.

I am an Indian citizen. If I am not able to maintain my non-resident status in any given financial year, can I buy an agricultural land in that year? Will there be any complication if I my residential status changes as non-resident from subsequent year with regard to owning of that agricultural land purchased in earlier year?

It seems you are confused between residential status under income tax laws and under Foreign Exchange Management Act (FEMA).  One is different from other. A person, generally, becomes a resident under the income tax laws depending on his physical stay in India during the relevant year and which is generally determined after end of the year. Residential status under income tax laws is relevant for the purpose of determining whether a particular income of that person will get taxed in India or not and it has nothing to do with right of a person to make investments in India. 

The rules governing investments in India by non-residents are governed by FEMA. Generally, a person becomes a non-resident, the moment he leaves India in three circumstances. Firstly, a person will become a non-resident the moment he leaves India to take up an employment outside India. Secondly a person will also become a non-resident for FEMA purposes once he leaves India to set up any business or vocation outside India. In addition to the above two conditions a person also becomes a non-resident if he leaves India with an intention to stay outside India for an indefinite period.  So a retired person will become a non-resident under FEMA if he decides to go to US to stay with his children for rest of his life. 

From the above discussion it becomes apparent that the residential status under income tax laws may change every year but under FEMA it does not change so frequently. So the question of you becoming a non-resident under FEMA for an intervening period does not arise unless you have in fact come back to India for good and then after one year you again decide to go back outside under any of the three circumstances mentioned above and in such case if you have purchased an agricultural land in India when you were in fact a resident under FEMA, there will not be any problem in continuing to hold it after you become a non-resident.

Balwant Jain is a tax and investment expert and can be reached on jainbalwant@gmail.com and @jainbalwant on Twitter.

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Published: 13 Dec 2021, 01:27 PM IST
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