UAE Shopping with Credit Cards: Restrictions on Property Purchases

Indian visitors to the UAE can use credit cards for everyday expenses like shopping and hotels, but not for property down payments. Using a credit card for down payments on off-plan properties in Dubai or elsewhere in the UAE, even with low down payment schemes, can lead to complications. This is because such transactions fall under the Reserve Bank of India's (RBI) Liberalised Remittance Scheme (LRS), which has specific compliance requirements.

The key issue is that credit card payments bypass the necessary compliance trail, including authorized dealers, Form A2, and Tax Collected at Source (TCS). While the payment might go through initially, it's not considered "clean" and can raise questions from regulators later. Resident Indians are allowed to remit up to $250,000 annually under LRS, and the remitting account must be at least a year old. Property investments made overseas must also be declared in Indian tax returns.

To comply with regulations, resident Indians should use their Indian bank to transfer funds under the LRS. This involves using a remitting account that is at least a year old, submitting Form A2 and PAN card details, and transferring funds directly from their bank account to the developer's UAE account. A 20% TCS will apply, which is recoverable during tax filing.

Following these procedures ensures smooth repatriation of funds, clear ownership, and avoids potential issues. While the paperwork may seem cumbersome, it protects the investment and ensures a compliant cross-border asset.