Dubai property owners under the spotlight
Apr 23, 2023
Many Indians already own a home in Dubai. And many more are considering buying property in Dubai. In this article, we aim to bring attention to some of the pitfalls of not doing proper research and following the illegal path to sending money to Dubai.
If you are planning to buy property in Dubai, please be aware that The Income Tax (IT) department is investigating Indians who have bought properties in Dubai in recent years. Tax notices have been sent to Indian nationals who have purchased real estate in Dubai, based on the intelligence they have gathered.
Q - What is a tax notice?
A - Tax notices require individuals to prove the source of funds used to buy the property, along with documentary evidence. You also need to show details that the assets have been declared in their tax returns filed in India, and if any tax on the income has been paid in India.
Q - How Do Indian Authorities know about foreign real estate purchase?
A - The Common Reporting Standards (CRS), which was started in 2018, requires information on financial assets held by individuals overseas to be shared between countries, including the UAE and India. Under the CRS, all information about an Indian resident is linked to their home country tax ID, making their data transparent.
Q - Why are notices being sent? I thought it was legal for Indians to own property in Dubai.
A - Under the Foreign Exchange Management Act (FEMA) of 1999, it is legal for both resident and non-resident Indians to purchase properties in Dubai. A resident individual can invest up to $250,000 in properties under the Liberalized Remittance Scheme (LRS).
However, under the Foreign Assets (FA) Schedule from the financial year 2011-12 and the Black Money (Undisclosed Foreign Income and Assets) Imposition of Tax Act (Black Money Act) of 2015, the resident individual must disclose the details of their foreign assets.
Q - What happens if I have not disclosed or cannot this information
A - Failure to disclose this information can result in severe penalties, including a tax of 30% and a penalty of up to 300% of the tax, along with criminal prosecution under the Black Money Act.
Q – What should I do if I want to buy a property in Dubai?
A – Do your research. Become aware of the basic rules and regulations. Do not rely on local property brokers and representatives from developers in Dubai alone. Remember their job is to sell you their property, not to educate you and inform you of the pitfalls.
Most importantly speak with a qualified accountant, one who has a good understanding of FEMA (Foreign Exchange Management Act) as they will guide you properly and stop you from making terribly expensive mistakes in the future.
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