Buyers must comply with the Foreign Exchange Management Act (FEMA) and the Income-Tax Act when buying property abroad.
"As the United Arab Emirates is a tax-free zone, black money is often routed through hawala to Dubai, then banked and invested in property. Cash deposits in Dubai bank accounts are not scrutinized for tax implications as they are in India. However, if the sender is a resident Indian, the source of funds could be questioned in India," says Vivek Jalan, partner, Tax Connect Advisory Services.
Remittance and purchase A resident Indian can acquire property abroad by remitting funds through the Liberalised Remittance Scheme (LRS) route. "Under LRS, all resident individuals, including minors, may remit up to $250,000 per financial year for permissible transactions, including buying property abroad. In the case of minors, the LRS declaration should be signed by the natural guardian," says Shefali Mudra, tax expert, ClearTax.
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BITING THE BULLET
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