India & UAE: Residents Facing 20% Tax On Overseas Investments

Following the new Budget, India Faces a 20% Tax On Investments

A proposal to increase Tax Collection at Source (TCS) on international remittances to 20% was added to the Financial Budget.

The current value is 5% for amounts exceeding a stated limit.

Indians are some of the most prominent foreign investors in Dubai’s real estate and India is now facing a 20% tax on investments.

The higher tax rate will apply to international tour packages as well.

In addition to paying for their child’s education or medical care, Indians can send up to $250,000 abroad each year.

These investments include non-movable assets like:

  • Real estate
  • Foreign stocks
  • Mutual funds
  • Cryptocurrency
  • Collecting art and other high-value items.

These transfers permitted by the Liberalized Remittance Scheme (LRS) are subject to a 5% tax on sums over $8,547 (₹7,00,000).

The budget proposal states that payments for studies and medical expenses will not be subject to the tax increase.

Banks sending money overseas will require to deduct tax at source at a rate of 20% without regarding a threshold.

The changes will come into effect on July 1st 2023.

Who will be impacted by India facing a 20% tax on investments?

In addition to those who invest in foreign equities and mutual funds, experts predicted that the move will mostly affect cash-rich Indian businesses.

These individuals have been investing in real estate in prestigious locations like Dubai and London.

Indians are among the most prominent foreign investors in Dubai’s real estate.

This would result in an instant rise in the amount of money sent abroad for remittances other than those for medical care and education for any residents covered by LRS.

Investments in movable or immovable foreign assets, such as real estate, foreign equities, mutual funds, foreign bonds, or even cryptocurrencies, would now be subject to TCS at a rate of 20%.

High-value acquisitions of stocks and art made by ultra-high-net-worth individuals won’t be significantly impacted.

The tourism sector is to be impacted, according to experts.

The action aims to assist the government in keeping foreign exchange costs under control at a time when the rupee is experiencing a substantial slowdown.


Source: Arabian Business

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