India's Tax Authorities Crack Down on Wealthy Indians with Foreign Properties
The Indian government is intensifying its efforts to combat black money and ensure transparency, with the income tax department now scrutinizing real estate investments made by high-net-worth individuals (HNIs) abroad.
IndiaTax AuthoritiesHnisForeign PropertiesReal Estate InvestmentsSwitzerlandPortugalReal EstateAug 14, 2024
After having cracked down on investments via cash held at Swiss accounts, the income tax department is now looking at tightening the noose around immovable assets held abroad by HNIs. According to sources, real estate investments by HNIs outside India are currently under the I-T department's scanner.
The taxman has not only issued notices but has also conducted survey action, which has revealed a sudden rise in real estate transactions by Indian HNIs in Switzerland and Portugal. The tax department through this action is targeting undisclosed foreign assets and income held and generated abroad.
The taxman has asked HNIs for more disclosures on foreign real estate assets held by HNIs through these notices and surveys, an action conducted under Section 133(A) and Section 133(6) of the Income Tax Act.
Sources further said recent investigations have uncovered several real estate transactions in Switzerland and Portugal. The tax department has found several interesting trends in these surveys and investigations. First, HNIs find that properties in foreign countries are significantly cheaper than similar properties in India.
Second, an influx of multinational companies into India has led to old business houses selling their stakes and amassing large sums of money, leading to wealth generation. Third, given that these HNIs have substantial funds, they find foreign investment opportunities more attractive than those available in India.
The Income Tax department also feels that the increased scrutiny, coupled with such interesting trends, has actually intensified the exodus of HNIs from India. Experts say that historically, HNIs purchased assets abroad through offshore trusts and at times through multiple intermediary companies, which were largely opaque structures.
However, with the global implementation of Ultimate Beneficial Ownership (UBO) rules and multiple financial leaks, such as the HSBC, Panama, and Paradise Papers, maintaining wealth in foreign financial assets has become challenging. Thus, HNIs were considering investing in real estate abroad as a safer bet.
India's focus on uncovering real estate transactions by its citizens in various jurisdictions is part of the tax enforcement strategy. I-T department has asked field formations that there has to be an increased scrutiny, combined with the taxation of undisclosed assets in the year they are discovered, without any time limitation.
Such orders from the top have further escalated the exodus of HNIs from India.
Frequently Asked Questions
What is the Indian government doing to combat black money?
The Indian government is intensifying its efforts to combat black money and ensure transparency, with the income tax department now scrutinizing real estate investments made by high-net-worth individuals (HNIs) abroad.
Which countries are being targeted by the Indian tax authorities?
The Indian tax authorities are targeting real estate investments made by HNIs in Switzerland and Portugal.
What is the purpose of the tax department's action?
The tax department's action is aimed at targeting undisclosed foreign assets and income held and generated abroad.
What are the consequences of the tax department's action?
The increased scrutiny has actually intensified the exodus of HNIs from India, according to sources.
What is the tax enforcement strategy of the Indian government?
The tax enforcement strategy of the Indian government involves increased scrutiny, combined with the taxation of undisclosed assets in the year they are discovered, without any time limitation.
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