Paying for a Dubai off-plan unit from India: the payment plan, year by year, against LRS

Short answer: an off-plan purchase can be paid over several financial years, and each instalment uses the remitter's USD 250,000 LRS limit for the year it is sent. With two co-owners that is USD 500,000 a year between them. Every rupee above ₹10 lakh a year per person carries 20% TCS, recoverable through the return or salary TDS. A UAE bank mortgage is not available to a resident on the general permission, and a developer's post-handover plan needs checking before signing. If a buyer becomes non-resident mid-plan, the LRS stops applying to them. If the deal is cancelled, the refund must come back to India within 180 days unless reinvested.

The figures below are an illustration of the Indian rules, not a view on any project, price or plan.

How a Dubai off-plan plan is paid

Off-plan means buying a unit before the building is complete. The usual features, as published by the Dubai authorities and widely described:

From India, each instalment is a separate LRS remittance by each buyer, from their own bank account, under their own PAN and Form A2, to the escrow account in the contract. The full compliance route, including documentation and Schedule FA, is in buying property in Dubai as a resident Indian.

A worked example: AED 2.5 million, two buyers, three years

Assumptions, all illustrative:

Against the LRS limit, per buyer:

TCS per buyer, at 20% on each year's LRS remittances above ₹10 lakh under section 394 of the Income-tax Act, 2025:

Between the two buyers, ₹1.18 crore is collected over three years. None of it is lost. Each buyer's TCS is credited to their PAN and set off against their own tax for the year, with any excess refunded after the return is processed; a salaried buyer can declare it to the employer in Form 122 and have salary TDS reduced instead. The routes are in TCS on foreign remittances in 2026. The ₹10 lakh threshold and the 20% rate are as enacted for tax year 2026-27; later years' rates should be checked when each instalment falls due.

Where a plan stops fitting

The same unit on a 50/50 plan, or bought by one buyer, gives a different answer:

A single buyer cannot pay a handover instalment above about AED 918,000 in one financial year. The choices are to bring a genuine co-owner in at the start, or to agree a schedule that splits the payment across 31 March. Paying the excess through a relative who is not on the title is not one of them: RBI does not allow clubbing of LRS limits for a capital account transaction by someone who is not a co-owner.

Two things erode the headroom unnoticed:

• Other LRS remittances in the same year. A child's university fees, a foreign brokerage top-up or a family holiday paid abroad all count against the same USD 250,000.
• Exchange rates. The limit is in dollars and the dirham is pegged to the dollar, so the headroom in dirhams does not move. The rupee cost, and the TCS on it, does.

Is an instalment a "purchase" before handover?

Rule 21 of the FEMA (Overseas Investment) Rules, 2022 permits a resident to acquire property abroad by purchase out of funds remitted under the LRS. An off-plan buyer pays under a registered sale contract, and the instalments are the purchase price. Nothing in the Rules or RBI's LRS direction requires the property to be complete before money is sent, and AD banks routinely remit instalments against the contract and the developer's demand letter.

For the return, the purchase starts a Schedule FA duty from the first calendar year in which you paid anything, while you are resident and ordinarily resident. The form has no instruction for an unfinished unit. The cautious course is to report it in the immovable property table with the amount paid to date as cost, and to update the cost as payments accumulate. An asset reported in a slightly imperfect table is disclosed; one left out is not.

UAE mortgages and post-handover plans

A mortgage from a UAE bank. The FEMA (Borrowing and Lending) Regulations, 2018 prohibit a person resident in India from borrowing in foreign exchange except in the cases regulation 4 lists. For a resident individual those are an interest-free loan of up to USD 250,000 from a relative living abroad on RBI's conditions, and loans to students for study abroad. A loan from a foreign bank for property is not in the list, so it needs RBI's specific permission. What was verified for this note is that absence in the list; no RBI notification permitting such loans to residents was found.

A loan from an Indian bank to fund the remittance. Also closed: RBI's LRS direction says banks should not extend any kind of credit facility to resident individuals to facilitate capital account remittances under the Scheme.

A developer's post-handover plan. Neither the Rules, the LRS direction nor the Borrowing and Lending Regulations address it in terms. The practical reading:

Take the AD bank's view in writing on the specific plan before signing. A remittance the bank will not process after handover is a problem you cannot fix from India.

If a buyer becomes non-resident mid-plan

Indian law has two different tests, and they move on different dates.

After the move, a buyer can pay later instalments from UAE salary, from an NRE account, or from an NRO account within the USD 1 million a year repatriation facility, which runs through the bank's Form 145 and, where required, a CA certificate in Form 146 (Form 15CA/15CB is now 145/146). Indian savings accounts must be redesignated as NRO. A non-resident can borrow abroad, so a UAE mortgage becomes a question for the UAE bank rather than FEMA.

If the buyer later returns, section 6(4) of FEMA allows a resident to keep property acquired while non-resident, and the LRS-funded part was lawful when paid. The tax position on return, including the not-ordinarily-resident years, is in the RNOR window. One caution for anyone moving to the UAE, which has no personal income tax: an Indian citizen with Indian income above ₹15 lakh who is not liable to tax in any country can be deemed resident under section 6(1A) of the 1961 Act. Check the corresponding provision of the 2025 Act before relying on non-residence.

Cancellation, refunds and the 180-day rule

If the purchase is cancelled, by agreement, by the developer or because a buyer stops paying, money may come back from the developer or the project escrow. The developer may be entitled to keep part of it under Dubai law and the contract; that is a matter for UAE advice.

On the Indian side, RBI's LRS direction (paragraph 17) says the received, realised, unspent or unused foreign exchange, unless reinvested, must be repatriated and surrendered to an authorised person within 180 days of receipt, under regulation 7 of the FEMA (Realisation, Repatriation and Surrender of Foreign Exchange) Regulations, 2015.

The TCS collected on the original remittances stays a credit on your PAN for those years; a refund does not reverse it. Any amount forfeited by the developer is a loss whose tax treatment depends on the facts and is not straightforward. And a contract assigned to another buyer before handover is a sale of a capital asset, taxed as in selling Dubai property: capital gains in India.

This note illustrates how the Liberalised Remittance Scheme, the FEMA (Overseas Investment) Rules, 2022 and the FEMA (Borrowing and Lending) Regulations, 2018 apply to an off-plan purchase paid in instalments, and the TCS under section 394 of the Income-tax Act, 2025. The exchange rate, the payment plan and the figures are assumptions for illustration. It is not advice on any individual's position and says nothing about any project or developer; the practice does not broker property or take commissions. The treatment of post-handover plans is not addressed expressly in RBI's directions and should be confirmed with the AD bank in writing before signing. Confirm each buyer's residential status and LRS headroom before each instalment.