India said on Saturday it had seized $725 million from Chinese smartphone maker Xiaomi's local bank accounts, accusing the tech firm of making "illegal remittances" to foreign entities.

The Indian Enforcement Directorate had been investigating Xiaomi's business practices over suspected violations of Indian foreign exchange laws and said the company had remitted the foreign currency to three foreign-based entities, including one Xiaomi group entity, in the name of royalty payments.

Xiaomi denied the accusation in a statement issued later on Saturday and said it complied with Indian law and believed its "royalty payments and statements to the bank are all legit and truthful."

"These royalty payments that Xiaomi India made were for the in-licensed technologies and IPs used in our Indian version products. It is a legitimate commercial arrangement for Xiaomi India to make such royalty payments. However, we are committed to working closely with government authorities to clarify any misunderstandings," Xiaomi's statement said.

Xiaomi was India's biggest smartphone seller in 2021, accounting for a 24-percent market share, followed by Samsung with a 19-percent market share, according to data from Counterpoint Research. 

(With input from Reuters)