AHMEDABAD: The income tax department is turning up the heat on taxpayers with offshore real estate, especially in Dubai. Many Gujarat-based investors who have purchased property in Dubai have started receiving notices and summons under Section 131(1A) of the Income Tax Act. Chartered accountants say many notices are based on passport details rather than PAN, as foreign property registrations don’t require Indian tax IDs.
With Dubai’s easy payment plans and high rental yields luring Indian investors, the taxman is now demanding a full paper trail—ownership details, funding sources, payment breakdowns, and even past income records—raising the stakes for those with unexplained overseas assets, according to notices received by investors.
The department has sought information on the name of the property owner, the detailed address of the foreign property, the date of acquisition, the purchase cost, sources of funds used, and the mode of payment, including the date, amount, and method of each instalment. Taxpayers must substantiate their submissions with documentary evidence, such as certified payment receipts and relevant bank transaction records.
Karim Lakhani, a chartered accountant, said, “A large number of wealthy individuals has invested in foreign real estate, especially in Dubai. Our analysis suggests that most notices are being sent to those who have purchased property in Dubai, often based on passport details. Developers there offer relaxed payment plans, allowing buyers to register properties by paying around 20% upfront and the balance in long-term instalments. Even those who haven’t completed their payments are receiving notices. Dubai has become a popular investment destination for Indians due to flexible payment plans and high rental yields, but buyers must be aware of the relevant income tax and RBI regulations.”
Sources said that taxpayers have been asked to provide details of their family members, business ventures, firms, and both active and closed bank accounts. They are also required to submit their income details and computation from the financial year 2018-19 to 2024-25.
International tax expert Mukesh Patel added, “The I-T Department now gathers financial transaction data through intelligence tools, and taxpayers must ensure all transactions are legally compliant to avoid serious issues. Buyers of foreign properties must be able to explain their sources of funds. If a property is purchased in India, tax-related concerns arise, but for overseas investments where the source of funds is unexplained, the Foreign Exchange Management Act (FEMA) may come into play. In addition to tax implications, the Enforcement Directorate (ED) can also act if an investment is found to be unlawful. Therefore, individuals investing in foreign real estate must comply with both tax laws and exchange control regulations, as violations can lead to legal trouble.”
