The Indian Income Tax Department has recently expanded its focus to include overseas property investments by Indian residents, moving beyond previous scrutiny of foreign bank accounts and trusts in tax havens. This shift is part of the automatic exchange of information under the Common Reporting Standard (CRS) developed by the OECD, which facilitates data sharing among over 100 countries but traditionally excludes property transactions. The department has recently issued notices to residents with real estate investments in Switzerland and Portugal. The goal is to prevent the misuse of citizenship and residency schemes for asset secrecy and ensure compliance with financial reporting standards.
The Indian Income Tax Department has recently strengthened its examination of overseas property investments by Indian residents. This new focus follows earlier investigations into foreign bank accounts, stock holdings, and trusts in tax havens.
The automatic exchange of information system under the Common Reporting Standard (CRS), established by the OECD a decade ago, involves over 100 countries. This system facilitates the sharing of financial data, including details on foreign bank accounts, securities, and trusts. Historically, CRS data has primarily included the names and addresses of Indians with these financial assets, especially in tax havens like Jersey, Guernsey, and the Bahamas. Information about property transactions was not previously included.
In recent years, there has been a rise in Indian investments in overseas real estate, driven by schemes that offer citizenship or long-term visas. Countries like Portugal and the UAE have become popular destinations for such investments. Financial institutions typically do not share information about property purchases, but the surge in high-value real estate transactions has caught the attention of Indian tax authorities.
Recently, the Income Tax Department issued notices to several residents regarding their property investments in Switzerland and Portugal. This move marks the first time that property acquisitions in these countries have come under investigation. The department is concerned that some of these citizenship and residency schemes may be used to hide unknown financial activities and assets.
The increased scrutiny of property investments aligns with a global trend to address potential misuse of citizenship and residency-by-investment schemes. These schemes, which offer benefits such as long-term visas or citizenship in exchange for significant real estate investments, may be used to avoid CRS reporting requirements and conceal wealth.
Indian residents with overseas property investments should be aware of the heightened investigation and ensure that their investments comply with reporting requirements. This move aims to enhance transparency and prevent tax evasion, reflecting a broader global effort to ensure financial transparency.
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