'To save crores in taxes': Investment banker on why rich are buying farmhouses

India Today

05-05-2025

Ever wondered why so many rich Indians are suddenly buying farmhouses outside big cities like Mumbai, Delhi, and Bangalore? It's not just for peace, fresh air, or growing vegetables, but to save big on taxes.Investment banker Sarthak Ahuja recently shared on LinkedIn how farmland is becoming the new favourite of wealthy investors. Not because they love farming, but because it helps them legally avoid paying high taxes.advertisementHe wrote, 'Why are Wealthy Indians Suddenly Buying so many Farmhouses? Have you ever thought about why the rich are so interested in getting a farmhouse? It's not just for organic vegetables and a big lawn, but to save crores in taxes.'
'There is a reason why there is a farmhouse boom starting in India suddenly you're seeing people from Mumbai wanting to get one in Karjat or Alibaug those from Delhi wanting to get one ahead of Manesar and people from Bangalore thinking of investing in Coonoor,' he added.
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NO TAX ON FARM INCOMEIn India, any income from farming is completely tax-free. That means if someone says they earned money by selling vegetables, fruits, or milk from their farmland, they don't have to pay income tax on it.There's also very little or no GST (Goods and Services Tax) on farm goods. So, those who have unaccounted cash can say it's income from farming and quietly deposit it in the bank. This way, they save on both income tax and GST.Ahuja further wrote, 'The first thing is that agricultural income is tax-free so any businessman who has undisclosed cash coming in, can easily tell the tax authorities that they sold vegetables grown at the farm or milk from their farm animals and keep depositing cash in their bank accounts, also saving GST on it because most farm produce has either zero tax, or a minimal rate of 5%. So both the Income Tax and GST saving can add up to almost +40% tax saving on the amount while making it tax-free.'HOW THE LOOPHOLE WORKSAccording to Ahuja, rich individuals use farmhouses to show large cash deposits as income from farming. Even cash deposits below Rs 2 lakh (which don't need a PAN number) can be explained away by saying many local buyers paid in cash for fruits and vegetables.advertisementThat's not all. Buying farmland also comes with other perks. He said, 'Buying a piece of agricultural land also has nil or negligible stamp duty expenses depending on the state, so just tax benefits in itself can go into over a crore for someone who owns a couple of acres.''Then there's using the place for private parties, and then putting it on AirBnB for 6-7 days a month to recover the actual cost of maintenance for the month," he wrote. 'Oh, and that's not all, if you sell the piece of land, the capital gains are tax-free under section 54B, and you can invest that money in a bigger piece of agricultural land.'He concluded the post by pointing out that while middle-class families are still trying to save enough for a flat in the city, the wealthy are quietly turning farmland into a smart financial tool. It is no longer just about weekend getaways, but about using legal gaps to retain more money.Must Watch