&imwidth=800&imheight=600&format=webp&quality=medium "ED flags Indians buying Dubai property via credit cards: FEMA, RBI rules explained")
Indian citizens who bought property in Dubai using an international credit card are now under the radar of the Enforcement Directorate (ED). The ED have sent a notice to the property buyers questioning their sources of funds. According to an ET report, at least three such buyers have received notifications from ED in February. According to the report, buyers unknowingly have either used an international credit card or used links sent by the realtor to pay the initial booking amount.
“The recent round of ED notices has gone to individuals who may have unknowingly used credit cards to buy UAE properties. They should approach the RBI to regularise the mode of payment. RBI may take a lenient view as the money is legitimate even if the mode of payment is wrong,” said Rajesh Shah, partner at the CA firm Jayantilal Thakkar.
Can Indians use foreign credit to buy foreign property?
For Indian citizens, purchase of property abroad is governed by the Foreign Exchange Management Act (FEMA) and the RBI's Liberalised Remittance Scheme (LRS). Under the LRS, people are allowed to transfer up to $250,000 a year for various permitted foreign exchange transactions. These transactions could be current account transactions like travel, education, healthcare, gifts and capital account transactions like purchase of land or investment in foreign shares, etc. There are various tax slabs for Tax Collection at Source for the purpose of remittance of amounts exceeding ₹10 lakh. Those transfers should happen through authorised banking channels. Using credit cards or borrowing funds makes those transactions non-compliant.
Also Read: Kharg Island crisis: Houthi threatens to disrupt Bab al-Mandab if US invades Kharg Island
How can buyers regularise transactions now?
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Buyers can regularise transactions buy going for compunding and paying a penalty. This could also suggest paying fresh funds through proper taxable channel while the builder send back the payments from the earlier transactions or in some cases the buyer may have to completely unwind from the transaction.
"Such compounding is typically subject to a no-objection from the ED, which in recent cases has been granted where it is satisfied that permitting compounding is aligned with the true spirit and intent of the Foreign Exchange Management Act (FEMA). In such cases, the RBI is empowered to cap the compounding amount at ₹2 lakhs," said Pankaj Bhuta, founder of the CA firm P. R. Bhuta & Co.
