Understanding TCS on foreign remittances for buying property in the UAE

For many discerning Indian property investors, Dubai’s real estate appeal lies in its world-class infrastructure, stable and consistent returns and of course, the golden visa. However, if you are considering buying property in Dubai as an Indian property investor, there is one factor you cannot overlook: Tax Collection at Source (TCS) on foreign remittances.

This term may sound complicated at first, but let’s break it down and simplify it.

What is TCS (Tax Collection at Source)?

TCS is the Indian government’s way of keeping track of how much money residents are making abroad. Whenever an Indian resident remits money overseas, under the Liberalized Remittance Scheme (LRS), whether it's for education, medical treatment, travel or property investment in the UAE, Indian banks are required to deduct a certain percentage as tax before the money leaves India.

Note: Currently, remittances above ₹7 lakh per year are subject to TCS.

In recent budgets, the rate has been revised to 20% on certain remittances. This excludes education and medical expenses. So if you are planning to send funds abroad and secure new homes for sale in the UAE, you will need to consider this factor since day one.

TCS: A relief or additional expenses?

TCS is not a permanent loss and this is where many investors can relax. To simplify, TCS is not an additional tax but rather the tax collected in advance. This amount is adjusted against the total tax liability when you file an income tax return in India.

For instance, if you are remitting ₹1 crore for a property investment in the UAE, a 20% TCS means the bank collects ₹20 lakhs upfront. However, when you file your taxes, this amount is adjusted against what you owe the Income Tax Department. In fact, if your tax liability is less, you can even claim back a refund.

As an investor, you will still be required to be prepared for a sizeable cash outflow. You will need to plan your budget accordingly.

Stay aligned with Indian tax rules

Dubai and Abu Dhabi are becoming property investment hotspots for savvy Indian buyers. The reasons that make these markets highly appealing for overseas investors are the absence of property tax, combined with high rental yields and the opportunity to qualify for a golden visa for investors.

Even though the UAE offers a tax-friendly environment, Indian buyers’ financial responsibilities include TCS on remittances, capital gains tax when selling and declaring rental income when filing in India.

As an Indian landlord in the UAE, your income/rental yields are taxable in India, as it’s still a part of your income. As India and the UAE have a Double Taxation Avoidance Agreement in place, you won’t be taxed twice on the same income.

Similarly, if you decide to sell your UAE property, the UAE won't tax you; the Indian system will, under STCG and LTSC.

Note: Certain exemptions can apply to this tax in case you decide to reinvest in another Indian property.

To summarise TCS

Tax Collection at Source or TCS is not designed to discourage discerning Indian buyers from exploring property investment in the UAE. It’s in fact the Indian government’s way of monitoring outward remittances in a more structured way.

From an investor point of view, the UAE is a leading hotspot due to several factors such as: a transparent, well-regulated legal real estate landscape, solid capital appreciation potential, Golden Visa residency and consistent rental income.

UAE property investment seamless with Benham and Reeves

If you wish to buy property in the UAE as an Indian investor, whether it’s for portfolio diversification, lifestyle or to secure a golden visa, understanding the TCS regulations is crucial. Benham and Reeves India works closely with discerning Indian investors every step of the property purchase journey.

Our agents can assist you with structuring remittances, navigate mortgage rules, ensure tax compliance and of course, help you find the best properties for sale in the UAE.

We truly believe that investing abroad shouldn’t feel overwhelming. With the right partner, investing in Dubai or Abu Dhabi can be seamless, secure and rewarding.