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Buying Property Abroad Is Becoming Popular
Buying property outside India is now a growing trend. Earlier, only big businessmen and industrialists invested abroad.
But now, working professionals and salaried people are also showing interest.
There are many reasons behind this:
Children’s education in foreign countries
Investment in different markets to reduce risk
Better returns and global exposure
Even the government has supported this trend by mentioning such options in this year’s budget.
Chartered Accountant C. Kamlesh Kumar explains the key rules and benefits.
Rules You Must Follow Before Buying Property Abroad
If you are an Indian citizen, you must follow the rules of the Reserve Bank of India (RBI).
Under the Liberalised Remittance Scheme (LRS):
You can send up to $250,000 per year abroad
Families often combine their limits to buy property
Payments can be made in installments, but each must stay within the yearly limit
All transactions must go through proper banking channels
It is also important to maintain proper documents to follow the Foreign Exchange Management Act 1999 (FEMA) rules.
Will You Pay Tax on Foreign Property Income?
Yes, if you live in India, your global income is taxable in India.
This means:
Rent earned from property abroad must be declared in India
It does not matter where the rent is received
If the same income is taxed in another country, you don’t have to pay tax twice.
India has agreements called Double Taxation Avoidance Agreements (DTAA) that help you avoid double tax.
Easy Example to Understand Tax Rules
Let’s say you buy a house in the United Kingdom and earn rent from it.
The UK government will tax that rental income
Since you are an Indian resident, India will also tax it
But here’s the relief:
You can claim a credit for the tax paid in the UK while filing your Indian tax return.
This is called a foreign tax credit and helps avoid paying tax twice.
Can You Take a Loan to Buy Property Abroad?
Yes, you can take a loan from a bank to purchase property overseas.
You can also get tax benefits on the interest paid on that loan.
However, the deduction is allowed only within the prescribed limits, so you should check the rules carefully.
What Happens When You Sell Property Abroad?
If you sell your foreign property and make a profit, it will be taxed in India as capital gains.
Here too:
You can use foreign tax credit if tax is paid abroad
You must report the transaction in your Indian tax return
Not declaring foreign assets can lead to serious trouble under the Black Money Act 2015, including heavy penalties and legal action.
New Budget Relief on Foreign Property
The government has made some important changes in this year’s budget.
Earlier:
There was a 30% tax and 120% penalty for not declaring foreign assets
Now:
A one-time disclosure window is available for properties up to ₹1 crore
You can regularize by paying tax and penalty
Limited relief is also given for assets up to ₹5 crore, if income was taxed but not reported
What This Means for You
Investing in property abroad can be a smart move, but it comes with rules and responsibilities.
If you follow RBI guidelines, report income correctly, and use tax benefits wisely, you can avoid legal issues and make the most of your investment.
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