Union Budget 2026: Investment in foreign domestic property & more related News Here

Indians are increasingly investing in real estate abroad. Even salaried individuals are doing so, motivated by factors such as children studying abroad and investment diversification. For resident individuals, such purchases are governed by the RBI’s Liberalized Remittance Scheme (LRS), which allows outward remittances of up to $250,000 per individual in a financial year. Families often pool individual LRS limits to finance a single acquisition. Payment can be made in installments, provided each remittance remains within the annual limit and is made through authorized banking channels. Proper documentation is essential to avoid violations under the Foreign Exchange Management Act, 1999 (FEMA).All foreign assets must be disclosed in the prescribed manner in Indian tax returns. Non-disclosure of foreign assets can have implications including heavy fines and prosecution under the Black Money Act, 2015.Rental income, whether earned in India or abroad, is taxable in India for tax residents. Foreign rental income must be reported even if taxed abroad, although relief in the form of foreign tax credits (depending on residence) may be available for any double taxed income under relevant tax treaties (double taxation avoidance agreements). Deduction can be claimed on interest on loan taken to acquire foreign property, subject to specified limits.Explanation of Foreign Tax Credit: Under India’s tax treaties, residents can claim foreign tax credit to avoid being taxed twice on the same income. For example, if an Indian resident earns rental income from a property in London, that income is taxable in India because of his residential status. Since the UK also taxes such rental income at source, the taxpayer can claim credit in India for the UK tax paid against the Indian tax payable on the same income. This mechanism ensures that income is effectively taxed only once, largely at the higher of two tax rates. Of course, proper documentation is important, including proof of taxes paid in the UK.What happens on sale of property? Capital gains from foreign assets are also taxable for residents in India, with tax treaty relief through foreign tax credits helping to reduce double taxation.