FEMA, LRS, and Your Dubai Down Payment: What the RBI Lets You Do

Buying property abroad from India is one of the most regulated cross-border transactions you will undertake. The Reserve Bank of India's Liberalised Remittance Scheme (LRS) is what makes it possible — and the Foreign Exchange Management Act (FEMA) is what defines the rails. This is the practical version: who can remit how much, through which account, with which paperwork, and where the common errors hide.

The headline limit

An Indian resident can remit up to USD 250,000 per financial year (April 1 to March 31) under LRS. At current rates (~₹83/USD, ~3.67 AED/USD), that converts to approximately AED 920,000 per year, per individual. Husband, wife, and adult children each have their own LRS budget — a family of four can move close to AED 3.7M in a single financial year, all legally.

The limit applies to the financial year and resets on April 1. Big purchases that need more than USD 250K of equity often time the contract to span two financial years — for example, a 10% reservation in March and the balance of the down payment after April 1 — to use two LRS allowances per remitter.

What about NRIs already abroad?

If you are an NRI tax-resident outside India, LRS does not apply to you — you are not an Indian resident for FEMA purposes. Your funds in NRE accounts are freely repatriable; you can transfer any amount from an NRE balance to a UAE bank account and use it for the down payment. This is why most NRI clients do all heavy down-payment lifting from NRE balances, not LRS.

If you are an NRI but still maintain Indian residency for tax purposes (returning soon, recent arrival abroad, etc.) — talk to your CA. The boundary between resident and non-resident under FEMA is precise and matters for which account you use.

Three account types — and which one is right for you

The cleanest NRI route is: maintain an NRE account in India fed by your foreign salary, and remit from NRE to UAE for the property. This avoids LRS entirely and the receipts at the UAE end are straightforward.

The paperwork your Indian bank will ask for

• Form A2. The standard outward remittance declaration, naming the purpose code (S0023 for immovable property purchase abroad).
• 15CA / 15CB. 15CA is your declaration; 15CB is a CA certificate. For property purchases above the threshold (currently INR 5 lakh per remittance), 15CB is mandatory.
• Source of funds proof. Salary slips, IT returns, sale proceeds documentation — depending on where the money is from.
• SPA copy or developer's invoice. The receiving end (developer's escrow, your UAE bank) will be named on the remittance.

Common errors

• Wrong purpose code. Using S0014 (gift) when the actual purpose is property purchase. The remittance may go through but reconciliation at IT scrutiny becomes painful.
• Splitting one purchase into multiple remittances without disclosure. RBI clubs related transactions. Disclose the full purchase amount on the first A2.
• Remitting via crypto. Not LRS-eligible. Direct bank wire is the only clean path.
• Ignoring the 20% TCS on LRS above INR 7 lakh. A 20% Tax Collected at Source applies on LRS remittances (above the threshold) for non-education, non-medical purposes. Refundable against your IT liability, but cash-flow impact at remittance.

Tax — the part most buyers forget

Once you own UAE property, the rental income is taxable in India under your global income (if you remain a resident Indian) or only in the country of source (if you are an NRI). UAE has zero income tax on property rental, so an NRI keeps 100% of net rent. A resident Indian declares the rent under "income from house property" with deductions for maintenance and mortgage interest.

When you sell, capital gains under the India-UAE DTAA are taxable only in the country where the property is situated. UAE has no capital gains tax on property. Net result: no India CGT on Dubai property sale for NRIs (subject to your residency status at the time of sale).

Closing

Thinking about a Dubai property purchase? We compare offers from 19+ UAE banks for residents and non-residents alike, and connect you with a licensed broker for a free pre-approval. Begin pre-approval — 2 minutes.