Dubai Real Estate: Indian Buyers Face Regulatory Scrutiny for ICC Payments
Indian property buyers in Dubai are facing regulatory challenges after using international credit cards (ICCs) for property purchases, raising concerns over compliance with RBI guidelines.
Dubai Real EstateIndian BuyersInternational Credit CardsRbi RegulationsProperty PurchaseReal Estate NewsAug 04, 2025
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. 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 a minimum of 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 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.
Frequently Asked Questions
What are the regulatory challenges faced by Indian property buyers in Dubai?
Indian property buyers in Dubai are facing regulatory challenges for using international credit cards (ICCs) for property purchases, which are not designed for such transactions and may violate RBI guidelines.
What is the TCS and how does it apply to property purchases?
The 20% tax-collected-at-source (TCS) applies to property purchases under section 206C(1G)(a) of the I-T Act, regardless of the payment method used.
What is the Liberalised Remittance Scheme (LRS)?
The LRS permits resident individuals annual transfers of $250,000 for overseas assets and online purchases, with ICC usage within India for foreign purchases counting towards LRS limits.
What are the steps buyers can take to regularize their property purchases?
Buyers can remit funds through the LRS, cancel previous credit card transactions, and seek post facto approval or sell the property to regularize their non-compliant transactions.
What is the role of the RBI in this regulatory scrutiny?
The Reserve Bank of India (RBI) plays a crucial role in regulating overseas transactions and interpreting guidelines to ensure compliance with foreign exchange management rules.
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