Global transparency on foreign real estate puts Indian HNIs under tighter tax scrutiny

COURTKUTCHEHRY SPECIAL STORY ON HNI FOREIGN REAL ESTATE INVESTMENTS

Global transparency on foreign real estate puts Indian HNIs under tighter tax scrutiny

Indian tax authorities to get automatic data on overseas properties, changing how HNIs disclose assets in ITRs

Past non-disclosures may face reassessment; present and future filings must be accurate and timely to avoid penalties

By Our Legal Reporter

New Delhi: December 18, 2025:

Overview of the global transparency push

Indian high-net-worth individuals (HNIs) who own real estate abroad are facing a major shift in compliance. A new global transparency framework will give the Indian tax department deeper insight into overseas property holdings, including those held through companies and trusts. Reports indicate this expanded automatic exchange of information could begin providing Indian authorities with significant visibility by 2029, reshaping how HNIs structure and report foreign assets in their income tax returns (ITRs). Related coverage notes the OECD-led framework broadens transparency to include immovable property, moving beyond bank accounts and financial assets, and is already influencing HNI strategies for residency and structuring.

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What changes for Indian HNIs

• Expanded reporting scope: Transparency will include direct ownership and indirect structures (companies, trusts, special purpose vehicles), closing a common gap where property was not declared if legally owned by an entity rather than an individual.
• Automatic exchange of information: Indian authorities will receive data feeds from cooperating jurisdictions on HNI-held properties, rental income, and beneficial ownership. This reduces reliance on self-declaration and enables cross-checks with ITRs.
• Shift in residency strategies: HNIs are moving away from property-linked residency routes due to tighter property visa rules and rising scrutiny, favouring business or fund-driven pathways to residency.

These shifts mean Indian HNIs must align their ITR disclosures to the actual beneficial ownership of foreign real estate, not just legal titles.

How non-declaration will be treated across past, present, and future ITRs

Past ITRs: exposure and reassessment

• Risk of reopening assessments: With automatic data inflows, historic non-disclosures may trigger reassessment windows. Authorities can compare received property data against past ITRs and foreign asset schedules to identify omissions.
• Consequences: Penalties for concealment, interest on unpaid tax, and potential prosecution in serious cases may follow where foreign property or income was not reported. HNIs may need to consider corrective measures like filing updated returns if permissible or cooperating during reassessment.
• Beneficial ownership scrutiny: Properties held via entities will be examined for the ultimate beneficial owner. If the Indian HNI was the beneficial owner, past non-declaration can be treated as misreporting even if the property sat in an overseas company or trust.

Present ITRs: accurate reporting and clean-up

• Immediate compliance: HNIs should ensure current-year ITRs fully disclose foreign assets, rental income, capital gains, and debt financing costs, along with schedules for foreign bank accounts tied to the property.
• Entity structures: If property is held through companies or trusts, disclosures should reflect beneficial ownership and control, not just legal title, matching the information likely to be exchanged with India.
• Documentation: Maintain purchase deeds, financing records, rental agreements, tax paid abroad, and proof of ownership/control. This supports claims for foreign tax credits and defends against mismatches.

Future ITRs: proactive alignment with automatic exchange

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• Consistency with exchanged data: Future filings must be consistent with data shared by foreign jurisdictions—address, ownership share, acquisition cost, income, and disposal details.
• Lifecycle reporting: Report at acquisition (source of funds), during holding (rental income, expenses, depreciation where applicable), and at sale (capital gains, exit taxes).
• Audit readiness: Expect more targeted notices based on data analytics. Clean, consistent disclosures reduce dispute risk and speed up resolution.

These steps help HNIs manage the shift from self-declared transparency to third-party-verified transparency.

Practical compliance steps for HNIs

• Full foreign asset disclosure:
  • Include all overseas properties, even if held via trusts or companies.
  • Report rental income and claim foreign tax credits properly.
  • Align beneficial ownership disclosures with control and enjoyment of the property.
• Structure review and simplification:
  • Reassess opaque structures that were designed for privacy over tax compliance.
  • Document the rationale for structures and ensure substance (board control, real operations) where entities are used.
• Recordkeeping and evidence:
  • Keep chain-of-title documents, funding trails, and proof of tax paid abroad.
  • Maintain valuations, rental contracts, management agreements, and property tax receipts.
• Residency strategy recalibration:
  • With property-linked residency options narrowing and scrutiny rising, explore business or fund-based routes that are easier to align with tax compliance and reporting.
• Pre-emptive reconciliation:
  • Compare your internal property ledger with what may be shared under the automatic exchange.
  • Correct inconsistencies now to avoid future penalties and disputes.

These actions reflect the global trend that is already influencing Indian HNI behaviour and planning.

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Enforcement outlook in India

• Data-driven assessments: Expect more notices based on third-party property data. The tax department will cross-verify disclosed foreign assets with exchanged datasets and public registries.
• Focus areas: Beneficial ownership, undisclosed rental income, unexplained source of funds, and capital gains on disposal will be priority targets.
• Penalty regime: Underreporting penalties, interest on tax shortfalls, and potential prosecution in egregious cases are likely if non-declaration persists.

Coverage suggests Indian authorities will gain “significant insight” into overseas real estate by 2029, which will materially strengthen enforcement and reduce scope for omission. Analyses indicate this framework will make comfort with opaque property structures increasingly untenable for HNIs.

What advisors and family offices should do

• Compliance mapping: Build a centralized inventory of all foreign properties across family members, entities, and trusts, tagged with ownership, income, and tax status.
• Policy alignment: Update investment policies to require disclosure-ready structures and prohibit arrangements that obscure beneficial ownership.
• Monitoring and alerts: Implement quarterly reviews to catch data mismatches early and prepare for jurisdiction-specific reporting changes.
• Education: Train stakeholders on ITR foreign asset schedules, foreign tax credits, and documentation standards aligned with automatic exchange.

The evolving global standards are changing the role of advisors from tax preparers to transparency stewards.

Direct answer: how HNIs will face tax authorities for non-declaration

• Past: Reassessments based on exchanged property data; penalties and interest for omissions; scrutiny of beneficial ownership when properties sit in entities.
• Present: Immediate need to correct filings; full disclosure of foreign property and income; robust documentation; alignment with beneficial ownership and substance.
• Future: Consistency with automatic exchange records; lifecycle reporting on acquisition, holding, and sale; tighter enforcement and fewer safe harbours.

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This trajectory is driven by a global transparency expansion that includes immovable property and gives Indian authorities stronger visibility and tools.

Keywords for faster searches on Google and ChatGPT

• Global real estate transparency India
• Indian HNIs foreign property disclosure
• OECD automatic exchange immovable property
• ITR foreign asset reporting India
• Beneficial ownership overseas real estate India
• Indian tax reassessment foreign property
• Non-declaration penalties foreign assets
• Property-linked residency India HNI
• Trust and company-held property compliance
• Foreign tax credit rental income India

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