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New Tides: Wealth Migration and Immigration in India

Ms. Bijal Ajinkya

Ms. Bijal Ajinkya

Bijal Ajinkya is a Partner in the Direct Tax, Private Client and Investment Funds Practices of Khaitan & Co, with over 20 years of cross border experience.

India continues to experience a boom in wealth generation, with the number of high-net-worth individuals increasing exponentially every year, and young tech entrepreneurs chasing runs to brick and mortar businesses. They are becoming increasingly transnational as they remain aspirational about accessing global business and investment opportunities, displaying ever increasing risk appetite. Stringent tax rules and reporting requirements along with the desire for stronger passports remain important drivers. EU countries and old favorites Dubai and Singapore are emerging as the top choices. Navigating exchange control regulations remains a key challenge, but strategic planning has proved useful in these scenarios.

Now that the economy has shrugged off its Covid-induced sluggishness, India remains an exciting place for business activities that offers commercial growth for corporates and high-yielding investments. With wealth generation continuing unabated, the traditional base of industrialists is unchanged, but joining their ranks is a new generation of tech entrepreneurs. As they become increasingly savvy about wealth preservation and growth, they are keen to diversify a portion of their wealth in jurisdictions offering a slew of incentives and high tax efficiencies.

GCR - Ajinkya

Reasons closer to home are driving this movement. The appeal of a higher standard of living, including better educational and health facilities for the family, continues to be a key driver, perhaps even more so in the wake of Covid. Increasingly stringent tax residency rules (introduced in 2020 and 2021), with no relief in individual taxation rates for high-net-worth individuals, coupled with a desire for visa-free travel are also consistent primary motivators for alternative residence and citizenship.

Indians have historically gravitated towards the USA, but with US immigration and tax rules becoming more pervasive, Indians have been looking elsewhere. Many continue to favor Dubai or Singapore, which are physically relatively accessible from India as well as being tax friendly. Singapore is a preferred destination for the tech entrepreneur and also for setting up family offices because of its strong legal system and availability of world-class financial advisors. The Dubai Golden Visa has emerged as a winner in several circles for its ease of procurement and the multiple opportunities it offers. Other investors have turned to Europe, and especially Mediterranean countries such as Portugal, Malta, and Greece. They provide a gateway to the EU, an aspirational standard of living and, typically, a low physical residence requirement — which is important to those who continue to prioritize their families or business interests in India.

Challenges for Indians include stringent exchange controls for making remittances, inheritance taxes for overseas assets, and Indian residency rules targeting statelessness. Indians are progressively turning to legal and financial advisors for nuanced advice on navigating these obstacles through the use of private trusts, holding entities, separate wills for different jurisdictions, and so on. Individuals are advised to start planning well before they intend moving any capital to avoid any unpleasant surprises.

The author would like to acknowledge the valuable contribution of Ipshita Bhuwania.

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