Super rich Indians buying properties in Dubai with cryptocurrencies may face legal, tax hurdles
New Delhi, Oct 6, 2022
Transferring cryptocurrencies to purchase a property in Dubai is a violation of FEMA. Earlier, the Centre announced a 30% tax on income from crypto assets with effect from April 1, 2022.
Many super-rich Indians are using cryptocurrencies to purchase properties in Dubai as top real estate players in the emirate accepting payments in digital currencies to cut deals. Such transactions are completely legal in Dubai, which wants to become the crypto capital of the world.
It is crucial to mention in this context that the property owners may face legal and tax challenges in India. People buying properties are unaware that their passports and information about their family members or close relatives in whose name the property is registered could someday be forwarded to the Income Tax (I-T) authorities and Directorate of Enforcement (ED), according to a report in the ET.
The Reserve Bank of India (RBI) has imposed a shadow ban on virtual digital assets. Earlier, the Centre had announced a 30 per cent tax on income from crypto assets with effect from April 1, 2022, and 1 per cent TDS (tax deducted at source) on payment of digital assets more than Rs 10,000 in a year.
Many high-net worth individuals (HNIs) have shifted their virtual digital assets to Dubai and other financial centres, and they may have unwittingly evaded taxes and committed offences. First, the moving of cryptocurrencies from the private wallet of a resident Indian to the wallet of a real estate firm in Dubai, or an intermediary hired by the real estate agent to change the cryptos, is a case of illegal cross-border transaction and a breach of the Foreign Exchange Management Act (FEMA), the financial daily mentioned.
Secondly, purchasing property overseas without a matching fund remittance via banking channels is against the central bank rules. More importantly, an assessee needs to provide this information in his/her annual income tax return.
Karan Batra, a Dubai-based chartered accountant, told the publication: “A lot of resident Indians invest in Dubai real estate to own a second home, or in the lure of additional income. They must consult tax professionals who understand laws of both countries. ”
He went on to add that buying property by paying in crypto is allowed, highlighting that Dubai does not want to become the "home for illegal money transactions.”