Tax Loophole? 'Buy Farmhouse In ...': CA Explains How Rich Indians Avoid Taxes

Farmhouses in India may be weekend retreats, but for the wealthy, they are also a way to save taxes legally. Chartered Accountant Meenal Goel, founder of an AI startup, recently broke down the strategy in a detailed LinkedIn post.

“If you think farmhouses are just for weekend parties, think again,” she wrote.

Goel explained how the ultra-wealthy are using farmhouses and agricultural land to reduce their tax liabilities, leveraging India’s own income tax provisions.

She talked about the multi-layered tax benefits:

• Agricultural income is tax-free: “Show revenue from crops - no income tax,” she wrote.

• GST benefits: Most agricultural produce attracts only 0-5% GST.

• Capital gains exemptions: Sell land and reinvest in agricultural land to claim exemptions under Section 54B.

• Lower stamp duty: Agricultural land often comes with reduced rates in many states.

Goel warned that these are just the tip of the iceberg. She argued that India’s wealthy are adept at using these provisions for personal gain.

“A middle-class person gives 30% of their hard-earned income to the government every year in the form of taxes. But the same rich people, who earn crores of rupees, don’t pay a single rupee in tax,” the CA said in a video on Youtube.

Agricultural income is tax-exempt in India. That means if you earn income by selling agricultural produce or renting out agricultural land, you don’t have to pay any tax on it. And this loophole is well known to rich people.

That’s why many rich people buy farmhouses in places like Noida, Gurugram, and Hyderabad, she said. 

“Even the richest people in the world don’t hold property in their own name because they’re not that naive,” Goel said. 

Wealthy individuals first set up an entity, such as a company, trust, or LLC, and then purchase property through that entity to gain tax benefits like depreciation and to protect the assets from creditors. In events like divorce, because the property is not legally owned by them, their assets remain protected.

Under the Income Tax Act, any gifts received during a wedding are tax-exempt for the bride and groom, she explained.

“Hence, Indian weddings are a perfect opportunity for rich people to convert their black money into white without paying any taxes,” the Goel said.