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Problem with buyers using international credit cards
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Investors scramble to regularise payments as RBI rules restrict overseas property purchases via ICCs
Indian property buyers in Dubai are grappling with regulatory hurdles after making payments for properties using international credit cards (ICCs). Many opted for ICC transactions via builder-provided payment links or during UAE visits, making down payments and instalments without going through bank paperwork — a move that also potentially bypassed the 20% tax collected at source (TCS) , reported timesofindia.indiatimes.com.
ICCs are designed for current account transactions such as purchasing books, digital subscriptions, or hotel bookings, not capital account transactions like property acquisition. While no explicit ban exists, banking experts interpret Reserve Bank of India (RBI) notifications as restricting ICC usage for overseas real estate purchases.
Payments made via ICCs for property deals violate RBI norms for capital account transactions
To mitigate scrutiny from tax and enforcement agencies, affected buyers are now looking to regularise their transactions.
Many plan to remit funds under the RBI’s Liberalised Remittance Scheme (LRS) and cancel prior credit card payments, citing them as errors.
Builders are expected to refund such payments, failing which buyers may have to sell their properties. Experts, including Rajesh Shah of Jayantilal Thakkar & Co, suggest that RBI should take a lenient approach and compound violations, provided buyers apply for regularisation.
Under the LRS, resident individuals can remit up to $250,000 annually for purposes such as buying overseas assets. While ICC spending within India for foreign purchases counts towards LRS limits, overseas travel spends are exempt. Property purchases using ICCs, however, remain non-compliant, irrespective of where the transaction occurs.
Legal experts highlight that under the Foreign Exchange Management (Overseas Investment) Rules, 2022, property can be purchased abroad only through specified channels such as inheritance, gift, or LRS remittance — not ICCs.
In such cases, post-facto RBI approval or sale of the property may be required to resolve non-compliance. Regardless of RBI’s stance, overseas property acquisitions remain subject to a 20% TCS under the Income Tax Act.
