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Time of India
6 days ago
- Business
- Time of India
Dubai real estate deals hit regulatory hurdle! Indian buyers who bought homes using international credit cards in a soup; here's why
AI-generated image Indian property buyers in Dubai are facing regulatory challenges after using international credit cards (ICCs) for property purchases. They opted for this payment method through builder-shared links or during UAE visits, making down payments and instalment payments. The process appeared straightforward, avoiding bank paperwork and potentially circumventing the 20% tax-collected-at-source ( TCS ). However, they allegedly misused ICCs, which are designed for current account transactions like purchasing books, digital content, and hotel bookings, rather than capital account transactions such as property acquisition. While no explicit regulation prohibits ICC usage for overseas property purchases, banking professionals interpret RBI notifications as restrictive of such practices. Also read: Foreign inflows hit 7-month high in primary market with $1.7 billion in July; secondary market sees sharp outflows To address scrutiny from income tax and enforcement authorities, these investors are pursuing corrective measures. They plan to remit funds through RBI's Liberalised Remittance Scheme (LRS), while cancelling previous credit card transactions, citing error. Subsequently, they expect refunds from builders, failing which property disposal becomes necessary. "Indian residents who have unintentionally paid money through credit card for purchase of property outside India need to approach RBI to regularise their mode of payment. RBI should take a lenient view as the money paid through credit card is a legitimate payment and only the mode of payment was wrong. The regulator should compound the contravention if applied for and need not ask to unwind the transaction or sell the property," said Rajesh Shah, partner at the CA firm Jayantilal Thakkar & Co, as quoted by news agency PTI. While compounding requires accepting violation and paying fines, some buyers prefer discretion, quietly cancelling credit card transactions. The LRS permits resident individuals annual transfers of $250,000 for overseas assets and online purchases. ICC usage within India for foreign purchases counts towards LRS limits, whilst overseas travel expenses are exempt. Property purchases via ICC remain non-compliant, regardless of transaction location. RBI's LRS circular specifies maintaining bank accounts for minimum one year before capital account remittances. According to Moin Ladha, partner at the law firm Khaitan & Co, quoted by ET, "Purchase of property overseas is permitted specifically under Foreign Exchange Management (Overseas Investment) Rules, 2022. These rules prescribe the mode and conditions permitting such acquisition, which include inheritance, gift, funds in a resident foreign currency account earned as an erstwhile NRI, and remittance under the LRS. Since general permission is not available to acquire a property by using an ICC, any such acquisitions need to be regularised (by a post facto approval or sale of the property) followed by compounding the interim non-compliance with RBI." Property purchases abroad remain subject to 20% TCS under section 206C(1G)(a) of the I-T Act, regardless of RBI's stance on transactions, notes Ashish Karundia, founder of Ashish Karundia & Co. Stay informed with the latest business news, updates on bank holidays and public holidays . Discover stories of India's leading eco-innovators at Ecopreneur Honours 2025
India Today
6 days ago
- Business
- India Today
Buying Dubai property with credit cards? Why many Indians are now in trouble
Many Indians are now finding themselves in a tricky spot after using their international credit cards (ICCs) to buy property in Dubai, reported The Economic Times. What seemed like an easy and quick way to pay is now causing them legal and tax problems back WENT WRONG?Several homebuyers either clicked on payment links shared by Dubai-based builders or swiped their credit cards during their visits to the UAE. It felt hassle-free, no paperwork, no visits to the bank, and they believed they could avoid the hefty 20% tax collected at source (TCS) on overseas there's a catch. Credit cards, even international ones, are only meant for current account transactions, like booking hotels, downloading movies or buying books. They are not allowed for capital account transactions such as buying immovable property or shares. While there's no specific law banning the use of ICCs for buying property abroad, experts believe it clearly violates RBI's guidelines. So, in effect, these buyers have gone against the WHAT?Worried about attracting attention from the Income Tax Department or the Enforcement Directorate, many of these buyers are scrambling to fix their mistake. They're now remitting money properly under the Liberalised Remittance Scheme (LRS) and asking builders to cancel the earlier credit card payments. Once the new payment is made through the right banking channels, the builder refunds the earlier way, they hope to stay out of are also preparing to approach the RBI to regularise the payment. This means acknowledging the mistake and paying a penalty to avoid bigger legal consequences—a process known as IS LRS?Under LRS, an Indian resident can send up to $250,000 a year abroad for buying assets or for personal use. But the payment must go through proper banking channels, and the individual must have held an account with the bank for at least one year before the remittance for capital account a credit card to pay for property, even if done abroad, does not count under LRS and is seen as a DO EXPERTS SAY?Rajesh Shah, partner at Jayantilal Thakkar & Co. Compounding, told ET that RBI ought to be forgiving since the funds themselves were legitimate and only the payment route was incorrect. 'RBI should take a lenient view as the money paid through credit card is a legitimate payment and only the mode of payment was wrong. The regulator should compound the contravention if applied for and need not ask to unwind the transaction or sell the property,' he Ladha, Moin Ladha, partner at the law firm Khaitan & Co, adds that the RBI's overseas investment rules clearly lay down how such purchases should be made, either through inheritance, gifts, earlier foreign earnings, or via LRS. Credit card use doesn't fall into any of CA Ashish Karundia reminds that no matter how the payment is made, if you buy property abroad, 20% TCS still applies under income tax rules.- Ends
Time of India
6 days ago
- Business
- Time of India
Buying property abroad with international credit cards may put you in regulatory crosshairs
Mumbai: Many Indians are trying to get out of a pickle after buying homes in Dubai with their international credit cards (ICCs). They clicked on payment links shared by overseas builders, and sometimes swiped the cards on visits to the UAE to make down payments and later pay off the balance in tranches. It was quick and convenient-no dealing with the bank branch or filling up forms. Besides, they thought they would escape the high 20% tax-collected-at-source (TCS) in case banks manage to put in place a system to collect it. Explore courses from Top Institutes in Please select course: Select a Course Category Public Policy Data Science Product Management Degree healthcare Operations Management Technology Healthcare MCA Artificial Intelligence PGDM Management Design Thinking Project Management Cybersecurity others Leadership Data Analytics Data Science CXO Digital Marketing Others MBA Finance Skills you'll gain: Duration: 12 Months IIM Calcutta Executive Programme in Public Policy and Management Starts on undefined Get Details Ill-advised and unwittingly, they used the ICC for which it is not meant to be: capital account transactions like purchase of immovable property and stocks. ICCs, like local cards, are intended to only facilitate current account transactions like buying books, downloading movies, booking hotels while at home or on a foreign tour. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like This Could Be the Best Time to Trade Gold in 5 Years IC Markets Learn More Undo There is no regulation that in as many words bans the use of ICC to buy properties abroad. But bankers and practitioners consider this a violation based on Reserve Bank of India ( RBI ) notifications. Now, to get the income tax (I-T) office and the enforcement off their back, the property buyers are trying to fix the error. How? By entering into another arrangement with the builders: these investors are preparing to remit fresh funds to builders under the RBI's Liberalised Remittance Scheme (LRS) while cancelling the earlier credit card transaction on the grounds that it was a mistake. Once done, they would receive a refund from the builder. Otherwise, they would have to sell the property and bring back the money. Live Events "Indian residents who have unintentionally paid money through credit card for purchase of property outside India need to approach RBI to regularise their mode of payment. RBI should take a lenient view as the money paid through credit card is a legitimate payment and only the mode of payment was wrong. The regulator should compound the contravention if applied for and need not ask to unwind the transaction or sell the property," said Rajesh Shah, partner at the CA firm Jayantilal Thakkar & Co. Compounding involves a person paying a fine after accepting the violation. Some of the buyers are reluctant to approach the regulator, preferring to lie low after cancelling the earlier credit card transaction. CARD USE-WHERE & WHAT The LRS allows a resident individual to transfer $250,000 a year to buy assets abroad as well as shop online from India. Under the rules, when a person uses ICC from India to buy stuff online from foreign sellers, the spend is part of the LRS limit. Such current account expenses while travelling abroad are excluded from LRS. (Perhaps, those who wiped their cards for an apartment during a trip to the Emirates mistakenly believed the expense would not consume their LRS limit). However, paying with the ICC for overseas property purchase is not considered within the regulations, irrespective of whether the card is used in India or abroad. It is understood that payments for such acquisitions must be through banking channels.
Time of India
11-06-2025
- Business
- Time of India
Banks police business card swipes, ask users to swear off misuse
Mumbai: Businessmen, CXOs, and many among the well-heeled would now think twice before using corporate credit cards to plan overseas holidays, download music and movies, and buy from foreign shopping sites. Banks are asking users of commercial or corporate cards to give an undertaking that they would be used to meet business and corporate expenses only, two senior bankers told ET. "Just as end-use of loans given to companies are tracked, the regulator wants banks to extend the practice for business cards as well. Most banks are doing this. If they suspect a customer is repeatedly using commercial cards for personal expenses, the card could be deactivated," said one of the bankers. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Undo Many premium account holders with high overseas expenses often use the commercial or corporate credit cards to book flights and hotels abroad as well as make expensive purchases from foreign retailers to avoid breaching the overseas spending limit . Some consciously use commercial credit cards for expensive local purchases to stay out of the glare of the Income tax department . A resident individual is allowed to spend $250,000 a year to buy stocks and properties from abroad as well as carry out certain current account transactions under the liberalised remittance scheme (LRS) of the Reserve Bank of India . Live Events Such purchases made by an individual using a personal credit (while he is in India) are counted as an LRS spent. However, the LRS limit -which is meant for individuals and not companies -is not consumed when a person (based in India) uses a commercial credit card to buy from foreign vendors. "So, many use their business or commercial credit cards to preserve their LRS limits. Now, after a nudge from RBI, this is a loophole that authorised dealer banks are trying to plug. Once a person gives a declaration to the bank that issues the commercial credit card, misusing it for personal expenses amounts to a serious violation," said Rajesh Shah, partner at the CA firm Jayantilal Thakkar & Co. The declaration forms spells out the various end uses of the corporate cards: statutory payments like tax, utility payments, travel payments, entertainment (such as hosting lunch for clients and business partners), insurance payments, names of the e-commerce websites etc. A personal credit card is mapped to the permanent account number of the individual user while the corporate card is not linked to the PAN of the employee or the director using it. "Some people take advantage of this. But most corporate card users would refrain from using it for personal expenses after giving an undertaking to the bank. Also, this could compel companies to discourage such a practice as it leaves a clear trail," said another banker. Typically, when corporate cards are used for personal spends, users later repay the companies. Significantly, overseas purchases using personal credit cards while travelling abroad is still not considered as part of the LRS limit. Sources think the step taken by banks could be a precursor to revisit the plan to include overseas card spends under LRS. "The proposal has been kept in abeyance, but we won't be surprised if the government revives it -particularly, given the reservations relating to outflows. There is no logic of excluding individual overseas card spends from LRS," said one of the persons quoted above.
