ED flags Indians buying Dubai properties using credit cards:

 

1.  Indians who used credit cards to buy homes in Dubai are beginning to receive notices from the Enforcement Directorate (ED).

2.  These property buyers had either swiped international credit cards (ICCs) on visits to the Emirates to pay the initial deposit or had clicked on payment links sent by UAE developers-probably, oblivious that they were trampling on Indian laws.

3.  Credit card transactions are like short-term loans and foreign exchange regulations prohibit individuals from borrowing to buy foreign properties. The Reserve Bank of India (RBI’s) liberalised remittance scheme (LTS) used by resident individuals to buy stocks and apartments abroad requires transfer of tax paid funds through official banking channels.

4.  Using international credit cards (ICCs) for such purchase’s falls outside the permitted structure since acquisition of overseas property is treated as a ‘capital account’ transaction. Where such payments have already been made, individuals may need to examine regularisation options, including the RBI’s compounding mechanism.

5.  Such compounding is typically subject to a no-objection from the ED, which in recent cases has been granted where it is satisfied that permitting compounding is aligned with the true spirit and intent of the Foreign Exchange Management Act (FEMA). In such cases, the RBI is empowered to cap the compounding amount at ₹2 lakhs.