Dear Readers,
Wishing you all a very Happy New Year!
Recently, the United Arab Emirates (UAE) Authorities shared information regarding properties held in UAE by Indian Residents. The Indian Income Tax Department is analyzing this information and is likely to carry out requisite enquiries in this regard. Many notices have already been sent to the owners of such properties.
This article highlights the basis of such notices, consequences for non-disclosure, key documents to be arranged to avoid delays in replying to the notice, etc.
Given the focus of the Government in unearthing foreign assets, it is of utmost importance that complete details of foreign assets and foreign income are disclosed to the Tax Department in the tax returns.
We trust that you will be enriched by reading this article.
Regards,
Samir Mahajan
Recently, India’s Foreign Asset Investigation Unit (FAIU) has issued tax notices to several affluent Indians who has purchased property in Dubai. Many such notices have been served in the past months, following information shared by the UAE authorities with India’s Income Tax Department. This action underscores a growing trend of cross-border information sharing, specifically aimed at identifying and addressing instances of undisclosed foreign assets. For Indians with property abroad, particularly in Dubai, understanding the tax treatment of such assets, the Indian tax residency rules, and compliance requirements under the Black Money Act has become more critical than ever.
The Foreign Asset Investigation Unit (FAIU) was established to probe cases of undeclared foreign assets held by Indian nationals. By working with tax and regulatory authorities globally, including leveraging information-sharing agreements with countries like the UAE, the FAIU seeks to uncover undisclosed assets abroad.
It is believed that United Arab Emirates (UAE) authorities has shared information with Income Tax Authorities on property ownership by people who hold Indian passports and have spent less than 90 days in the Country, subsequent to which notices were issued by the Income Tax Department.
In response to the notices, the FAIU has asked several individuals to confirm whether the funds used for their Dubai property purchases are derived from legitimate sources and properly declared in their Foreign Asset Schedule on Income Tax Return. If the source of acquisition is established even if the asset was not declared in FA schedule, assessee may be saved from harsh Black Money Act. However, if the source if not traceable, then they would have to pay a hefty tax and fine.
For Indians with property abroad, the FAIU’s mandate is particularly relevant. Non-disclosure of overseas assets or investments could result in hefty penalties, back taxes, or even prosecution under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015. The FAIU’s recent issuance of notices to Indian nationals with undeclared Dubai properties is a reminder of the unit’s vigilance in scrutinizing offshore holdings.
Over the past few years many Indians have been attracted by Dubai realtors with deals that require a down-payment of just 10% of the property value, with balance to be paid in installments over a period of 4 to 8 years.
Section 43 of the Black Money Act imposes a penalty of INR 10 Lakhs for failing to disclose foreign assets income or assets or inaccurate disclosure by the assessee in the Income Tax Return which may be invoked by the Assessing officer.
Therefore, it is imperative to arrange the documents like Income Tax Return along with details of correct details of foreign assets, documents evidencing source of Income, details of payment made to Dubai realtors before replying to the notice sent by the Income Tax Department to avoid any adverse consequences.
