Indian tax authorities are escalating efforts to address undisclosed foreign assets, particularly properties in the United Arab Emirates (UAE), under the framework of the Indian Income Tax Act of 1961 and related legislation. Recent actions highlight the government’s commitment to curbing tax evasion, with significant implications for Indian residents owning unreported properties abroad. Failure to comply could lead to substantial financial penalties and, in some cases, the seizure of assets, including those in the UAE.

Taxing Foreign Assets Under the Income Tax Act

The Indian Income Tax Act of 1961 mandates that Indian residents report their global income, including earnings from foreign properties, as outlined in Section 5. Non-disclosure of such assets can trigger severe consequences under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act of 2015. This law imposes a 30% tax on the value of undisclosed foreign assets, such as a villa in Dubai, along with penalties up to 120% of the tax owed. For instance, an unreported UAE property valued at ₹10 crore could incur a tax liability of ₹3 crore and penalties reaching ₹6.6 crore. Willful non-disclosure may also lead to prosecution, with potential imprisonment of up to seven years.

Mechanisms for Asset Recovery

While the Income Tax Act does not grant Indian authorities direct power to seize properties in the UAE, it provides mechanisms for recovering unpaid taxes. Under Section 222, the Income Tax Department can attach and sell assets within India to recover dues. For foreign assets, enforcement is more complex, requiring international cooperation through agreements like the Mutual Legal Assistance Treaty (MLAT) between India and the UAE. This treaty facilitates assistance in criminal matters, including asset recovery, but its application to tax evasion cases is limited unless linked to broader offenses.

Enforcement Directorate’s Role in UAE Property Seizures

The Enforcement Directorate (ED) plays a critical role when undisclosed UAE properties are suspected to involve illicit funds. Under the Prevention of Money Laundering Act (PMLA), the ED can attach properties both in India and abroad if they are deemed “proceeds of crime.” For example, if an Indian resident uses unreported funds to purchase a UAE property, tax evasion under the Income Tax Act may escalate to a money laundering investigation. In February 2025, the ED attached assets in Dubai linked to a Bitcoin fraud case, demonstrating its ability to target foreign properties through international cooperation.

Recent Developments

In November 2024, the Income Tax Department issued notices to over 500 Indian residents with undisclosed Dubai properties, demanding proof of legitimate funding and compliance with tax filings, according to reports from Economic Times and Business Standard. By July 2025, the ED had initiated investigations into Indian buyers of UAE properties under the PMLA and the Foreign Exchange Management Act (FEMA), as reported by India Today. These actions underscore the government’s intensified focus on cross-border tax evasion, with data sharing from countries like Germany aiding the identification of unreported assets.

Implications for Indian Residents

Indian residents owning UAE properties face significant risks if they fail to disclose these assets. The financial penalties under the Black Money Act can exceed the value of the property itself, and non-compliance may lead to legal action or asset forfeiture. The ED’s involvement in cases linked to money laundering further heightens the stakes, as seen in recent cases where Dubai properties were attached.

To avoid such consequences, taxpayers must report foreign assets in their income tax returns, typically through the foreign asset schedule, and ensure all funds used for purchases are legitimate and documented. Failure to comply can result in notices, financial penalties, and potential prosecution.

Expert Assistance for Compliance

Firms like DP Taxation Consultancy offer specialized services to help Indian residents navigate these complex regulations. DP Taxation provides comprehensive tax advisory services, including assistance with tax structuring, compliance with international tax laws, and preparation of accurate tax filings. We are also proficient in transfer pricing, corporate tax, and value-added tax (VAT), ensuring clients meet obligations and are compliant under both Indian and UAE regulations. Additionally, our services cover business setup and accounting, helping clients maintain transparent financial records to avoid scrutiny from authorities like the Income Tax Department or the ED.

Conclusion

The Indian Income Tax Act of 1961, in conjunction with the Black Money Act, forms a robust framework for taxing undisclosed foreign assets. While direct seizure of UAE properties by the tax department is unlikely, recovery actions within India and potential ED interventions pose significant risks for non-compliant taxpayers. As Indian authorities strengthen international cooperation and data-sharing efforts, compliance with tax laws is more critical than ever for residents with overseas investments.

Sources: Economic Times (November 2024),

India Today (July 2025),

Business Standard (November 2024),

Income Tax Department (incometaxindia.gov.in).