The Enforcement Directorate (ED) has started questioning many Indians who bought houses in Dubai. The agency is asking them where they got the money to buy these properties, according to a report by The Economic Times (ET). 

Many of these people are now in trouble because they could not show proper bank records to prove how they paid for the homes. This action started after the Income Tax (I-T) department sent them notices last year. Now, the ED is investigating them for breaking rules under the Foreign Exchange Management Act (FEMA) and the Prevention of Money Laundering Act (PMLA). Sources told ET that most of the people who got ED notices live in northern India.

How the law works

As per Indian rules, if someone wants to buy property or invest money outside India, they must send the money through proper banking channels. The Reserve Bank of India (RBI) has a rule called the Liberalised Remittance Scheme (LRS). Under this, a person can send up to $250,000 abroad in one year, but only after giving all the necessary documents.

However, many of these property buyers did not follow this rule. The ED is checking cases where people used cryptocurrencies like Bitcoin or Ethereum or paid using foreign credit cards with high limits to buy the houses.

Cryptos used to buy Dubai property

Some Indians have used cryptocurrency to buy homes in Dubai by sending coins directly from their own wallets to property builders' wallets. This breaks Indian law because such payments did not go through official banks or follow RBI’s Liberalised Remittance Scheme (LRS) rules.

People chose crypto to avoid high currency conversion fees, crypto taxes in India, or to keep their $250,000 LRS limit free for other uses. Even if the crypto was bought with legal, tax-paid money, using it directly to buy property abroad without bank approval is still not allowed.

Tax trouble ahead

Many buyers did not mention these Dubai homes in their Indian tax returns. They thought the Indian government wouldn’t find out, since countries usually share information about bank accounts, not real estate.

However, Indian officials got this property data from Dubai and other sources. Now, these buyers may face big penalties under the Black Money Act. If they cannot prove that the money was sent legally, they could be asked to pay heavy taxes and fines up to 120% of the property’s value. Those who used illegal ways like hawala to send money could get into even more serious trouble. 

Developers accepted crypto

Dubai property developers have been accepting Bitcoin and Ethereum for a long time. Buyers found this method fast and cheaper. Although Dubai has its own checks and rules for crypto payments, what is legal there is not automatically legal in India. Experts say that depending on how these payments were done, buyers may have broken several Indian laws, including crossing their LRS limits and using unapproved ways to send money abroad. What looked like a quick and easy way to buy a luxury home in Dubai has now turned into a big legal headache for many Indians.