Investing in a home or apartment in Dubai is an exciting prospect for Indian investors. However, before you send money from India to pay for a Dubai property, it's crucial to understand the Indian regulations involved. Indian residents are subject to the Liberalised Remittance Scheme (LRS) limits and Tax Collected at Source (TCS) rules on foreign remittances, while Non-Resident Indians (NRIs) have a different framework for moving funds out of India.
This article breaks down these concepts in simple terms, and explains how they apply when buying a Dubai property – whether off-plan (under construction) or in the secondary market (resale). We'll also cover compliance steps, potential strategies (as reported by official sources), and key differences for resident vs NRI investors. By the end, you'll have a clearer idea of how to manage your money transfers legally and efficiently.
Liberalised Remittance Scheme (LRS) – The Basics
LRS Limit
The Liberalised Remittance Scheme (LRS) is a facility by the Reserve Bank of India that allows resident individuals to freely remit up to USD $250,000 per financial year (April–March) for permitted overseas expenses or investments.
In other words, an Indian resident can send up to $250,000 abroad in total during one financial year without special permission. This limit applies per person (including minors, through a guardian) and covers all foreign remittances combined in that year. For example, if you've already sent money abroad for travel, education, or other investments, those count toward the $250,000 cap for that year.
Property Purchase Allowed
Purchasing immovable property overseas (such as a house in Dubai) is an allowed use of LRS. Many Indians use LRS to invest in foreign real estate, including Dubai's property market. You can use your LRS entitlement to pay the seller or developer in Dubai, subject to the annual limit.
No Frequency Restriction
You can remit in multiple installments or transactions – there's no restriction on frequency – as long as the total stays within $250,000 in the financial year. For instance, one could send $100,000 in one transfer and $150,000 later in the year, totaling $250,000.
If the Property Costs More
What if the price of the Dubai property exceeds $250,000? There are a few approaches:
1. Combine Family Members' Limits
RBI allows family members to pool their LRS limits for a joint purchase, provided each remitter is a co-owner of the property. For example, a husband and wife could each remit $250,000 in a year (total $500,000) to buy a property jointly in both their names. (Clubbing funds is not permitted if the other person is not actually an owner of the asset) Even minor children's limits can be used via a guardian, if the property is also held in the child's name.
2. Stagger Payments Across Financial Years
If possible, spread the payment over two or more financial years to utilize a fresh $250k limit each year. For instance, you might remit part of the amount in March (end of FY), and the next tranche in April (new FY), to effectively double the available limit in a short time. Many investors plan large transfers around the fiscal year cutoff – sending one installment at the end of March, then the next in early April when a new $250,000 limit becomes available.
3. Seek RBI Approval for Exceeding LRS
If the amount required in one year still exceeds what these strategies cover, you must obtain prior permission from the Reserve Bank of India to remit beyond the $250,000 LRS cap. RBI generally grants such exceptions only for certain cases (like medical, education, or emigration needs with documentation). For a property purchase (which doesn't fall under those automatic exceptions), you or your bank would need to make a specific request to RBI explaining the situation.
Compliance Tip
Every LRS remittance requires a simple declaration (Form A2 cum LRS Declaration) with your bank, confirming the purpose and that you will remain within the limit. You also need to provide your PAN (Permanent Account Number), as PAN is mandatory for all LRS remittances.
Tax Collected at Source (TCS) on Foreign Remittances
When sending money overseas under LRS, Indian residents should be aware of Tax Collected at Source (TCS) rules. TCS is not an extra fee or charge on your property – it's an advance tax that the bank collects and deposits to the government against your PAN, which you can later claim in your income tax return.
₹10 Lakh Threshold
Under current rules (post-Budget 2025 updates), no TCS is collected on foreign remittances until you cross ₹10 lakh in a financial year. This ₹10,00,000 per person per year is a threshold across all purposes and all modes of remittance.
TCS Rates
For buying property abroad (classified as "investment/other purpose" under LRS), the TCS rate is 20% on the amount exceeding ₹10 lakh. In practical terms, suppose you remit ₹15,00,000 to a Dubai developer or seller in the same year. The first ₹10,00,000 is not subject to TCS, but the remaining ₹5,00,000 will attract a 20% TCS. The bank will collect ₹1,00,000 (which is 20% of ₹5 lakh) as TCS and deposit it to the tax authorities.
Important
TCS is collected by the bank at the time of remittance once you cross the threshold. That ₹1 lakh isn't a fee lost to you; it will reflect in your Form 26AS tax credit statement and can be adjusted against your income tax liability or refunded when you file your tax return.
Exceptions
Lower TCS rates apply to certain categories (education or medical remittances) and there is no TCS at all up to ₹10L if the remittance is for education through a student loan. However, buying property does not fall in those excepted categories – it comes under "any other purpose," which is subject to the full 20% TCS beyond ₹10L.
Indian Residents: Buying Dubai Property under LRS
If you are an Indian resident with income or savings in India, and you want to buy a property in Dubai, here's how the process and rules come together for you:
Use of LRS
You will be using the Liberalised Remittance Scheme to transfer funds. As discussed, up to USD 250,000 (roughly ₹2.06 crore at current rates) per financial year is allowed without special permission. This amount typically serves as your budget per person per year for the purchase.
Multiple Remitters for Higher Amounts
If the property price is beyond what one person can remit, plan to involve multiple family members as co-investors. Each co-owner (spouse, parent, adult child, etc.) can remit their own $250k limit, significantly increasing the total pool. For example, a husband and wife could jointly send up to $500k (about ₹4.1 crore) in one year, which might cover a Dubai apartment's cost.
Off-Plan Purchase (Under Construction)
Many new developments in Dubai allow payments in stages (e.g. a down payment, milestone payments, and a final installment on handover). Indian resident buyers can leverage this schedule to stay within LRS limits each year. For instance, if you owe 50% this year and 50% next year, each year's outflow might be within $250k.
Secondary Market Purchase (Resale Property)
In a resale, typically the full price (or a large chunk) needs to be paid within a short period (a few weeks or months) to the seller or into an escrow. This scenario is more challenging under LRS if the amount is above $250k.
NRIs with Indian Savings: Purchasing Dubai Property
Now let's address the scenario of Non-Resident Indians (NRIs) or Persons of Indian Origin who live abroad but have savings or assets in India that they want to use for a Dubai property purchase. The rules differ because LRS is only for resident Indians – NRIs cannot use LRS.
NRO Account and the $1 Million Repatriation Scheme
If you are an NRI, you likely have an NRO account in India for your Indian income (like rents, dividends, or sale proceeds of Indian assets). NRIs/PIOs are permitted to repatriate up to USD $1 million per financial year from an NRO account (after paying any due taxes).
No TCS on NRI Outward Remittance
The TCS provisions do not apply to money remitted abroad by NRIs from their NRO accounts. TCS is collected only on LRS remittances by residents (the income-tax law specifically targets remittances under LRS). Since an NRI's transfer from NRO is under a different FEMA scheme, banks will not collect TCS on those outflows.
Using NRE Accounts
If your savings in India are already in an NRE account (funds that were remitted from abroad or earned abroad), those balances are fully repatriable without any limit or further permission. You can directly transfer from NRE to an overseas account or to the Dubai seller. NRE outward remittances also do not attract TCS.
Tax Considerations for NRIs
Unlike residents, an NRI's foreign income is not taxable in India. So if an NRI buys a house in Dubai and later earns rental income or capital gains from selling it, India doesn't tax that (as long as you remain an NRI for that year).
Compliance Checklist and Planning Tips
Whether you are a resident or NRI, here are some key compliance steps and strategic tips when purchasing Dubai real estate with Indian funds:
Before Remittance:
- Calculate how much you need to remit, and map out a plan if it exceeds your available limit
- Talk to your bank well in advance about the remittance process
- Obtain PAN (Permanent Account Number) if you don't have one
- If multiple family members are remitting, ensure each follows the procedure
During Remittance:
- Fill out the Form A2 and LRS Declaration (for residents) for each transfer
- Provide supporting documents if asked by the bank
- Be prepared for TCS payment if you cross ₹10,00,000 threshold
- Keep SWIFT receipts or transaction references
After Remittance:
- Verify that the money reached the intended account in Dubai
- Collect the TCS Certificate (Form 27D) from the bank
- Claim TCS credit in your next Income Tax Return
- Maintain a property file with all documentation
Off-Plan vs. Secondary Market – A Quick Comparison
| Aspect | Off-Plan Purchase | Secondary Market Purchase |
|---|---|---|
| Payment Timeline | Spread over months/years in milestones | Lump sum (often 1-3 payments within a short period) |
| LRS Strategy | Easier to split across financial years; can keep each year's remittance within $250k | More challenging – may require multiple remitters or special timing |
| TCS Impact | Initial installments might be kept under ₹10L. Eventually, later installments likely push total over ₹10L | High likelihood of crossing ₹10L at once, so 20% on the amount above ₹10L will be collected |
| Flexibility | High – developers often allow some customization in payment schedules | Low – sellers usually want a quick, clean transaction |
| Risk | Ensure you will have the future LRS capacity; currency fluctuation over long build period | Need to arrange finances beforehand; sellers might not wait for approvals |
Conclusion
Buying a property in Dubai as an Indian investor is absolutely achievable, but it does come with homework on India's foreign exchange rules. Resident Indians must navigate the LRS limit of $250,000/year and factor in TCS on large remittances. NRIs have more leeway up to $1 million/year from their Indian accounts and generally avoid TCS on those transfers.
By planning in advance – whether it means splitting payments across family members or financial years, or arranging necessary approvals – you can ensure your dream home in Dubai doesn't run into regulatory roadblocks. Always keep records of your transactions and stay within the prescribed limits to remain compliant.
Disclaimer
This article is for educational purposes only and does not constitute financial or tax advice. Regulations can change, and individual situations vary. Before making any foreign property purchase or remittance, you should consult with a qualified Chartered Accountant or financial advisor who can provide guidance tailored to your circumstances. The author and publisher are not liable for any decisions made based on this information. Always ensure compliance with the latest RBI and tax guidelines when sending money abroad.