Citing FEMA and RBI infractions with significant legal and financial risks, experts advise Indians investing in foreign real estate to refrain from using foreign credit cards.

It has been advised that Indian buyers of real estate overseas, particularly in Dubai, should refrain from using international credit cards (ICCs) as down payments. Such transactions may be in violation of Indian foreign exchange regulations and result in severe financial and legal repercussions. To avoid regulatory attention and fines, experts advise purchasers to adhere carefully to the Reserve Bank of India's (RBI) Liberalized Remittance Scheme (LRS) and FEMA laws.

International credit cards are not meant for capital account activities, such as investing in foreign real estate, but rather for current account activities, such as travel, shopping, and education, according to Indian tax and real estate experts.

Purchasing real estate overseas is considered a capital account transaction under FEMA. Since ICCs are only permitted for current account transactions, using them for these kinds of payments is prohibited. According to Anurag Chaturvedi, CEO of Andersen UAE, Indians can send up to $250,000 a year through approved banks under the RBI's Liberalized Remittance Scheme (LRS). RBI investigations may be triggered if ICCs are used in place of LRS.

Through developer linkages or in-person visits, Indian officials, like as the RBI and Enforcement Directorate (ED), keep a tight eye on anyone purchasing real estate in Dubai through ICCs. They are looking into possible FEMA and PMLA breaches related to avoiding authorized remittance channels.

Using ICCs may result in penalties, tax obligations for evading TCS, and potential money laundering litigation. It could be necessary for certain purchasers to reverse payments and finish transactions through channels authorized by LRS.

Gaurav Keswani, CEO of JSB Incorporation, cautions that ICC payments for foreign property violate RBI regulations and LRS restrictions, which call for transfers via authorized banks with the required paperwork and an account that has been active for at least a year.

In addition to potential legal repercussions, there are significant financial disadvantages to using foreign credit cards for such expensive transactions. This approach is financially unwise, as ICC payments include exorbitant interest rates, foreign exchange markups, late fees, and penalties.