Indians have long been prominent players in the global real estate market, investing in prime properties in locations like California, Dubai, and London. Now, even minors are entering the scene, with the UAE being a particularly popular destination. This trend is fueled by the RBI's Liberalised Remittance Scheme (LRS), allowing individuals to remit up to $250,000 per financial year for various purposes, including property investments.

Leveraging the LRS: Navigating the New Rules

Recent amendments to the LRS have added complexity to the process. Unused funds must now be repatriated within 180 days, making it challenging to accumulate large sums for a property purchase. As a result, some high-net-worth individuals (HNIs) are investing in properties under their minor children's names to ensure sufficient funds are available.

Tax and Disclosure Requirements

While gifting funds to minors for overseas property investments has no tax implications in India, it's crucial to adhere to disclosure requirements. All Indian tax residents with overseas assets must file an income tax return and disclose these assets, including property, in Schedule FA. Any foreign income generated from these assets must also be reported in Schedule FSI.

The Complexities of Minor Ownership

The issue of minor ownership can become quite intricate. While income from the property can be clubbed with a parent's income for tax purposes, the asset itself must still be disclosed separately. This creates a challenge, as minors cannot file tax returns unless they have earned income through their efforts.

Expert Advice and Solutions

Tax experts advise guardians managing minors' overseas assets to disclose these assets in their tax returns. It's crucial to seek professional guidance to navigate the complexities and ensure compliance with all regulations.

Conclusion:

The trend of investing in overseas properties for minor children highlights the evolving strategies of wealthy Indian families in wealth management and succession planning. While this approach offers certain benefits, it's essential to understand the legal and tax implications and seek expert advice to ensure compliance and avoid penalties.

-source: findia.indiatimes.com