India’s wealthiest individuals are employing a strategic financial maneuver: earning their fortunes in India while opting to invest and ultimately retire abroad. This trend, highlighted by finfluencer Akshat Shrivastava, is largely driven by India’s tax policies.
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For the ultra-rich, operational income derived from businesses in India, such as ports and mines, is taxed at corporate rates. These rates are typically lower than personal income taxes, making it financially advantageous to own and operate businesses within the country.
The Allure of Overseas Investing
However, the picture changes significantly when it comes to investment and dividend income. India levies:
- A minimum of 12.5% capital gains tax on stocks and up to 33% on bonds.
- High taxes on dividend income from stock payouts or rental returns on real estate.
This “crazy” tax burden on investments, as Shrivastava describes it, is a primary reason why the wealthy establish family investment offices abroad. These offshore entities allow them to legally minimize their domestic tax liabilities while still capitalizing on India’s economic growth.
Planning for a Global Retirement
This strategic approach also sets the stage for a future outside of India. Shrivastava predicts a clear division: “Rich people will work in India. But, retire abroad.”
Despite potential nationalistic critiques, Shrivastava maintains that this shift is a calculated financial strategy rather than a subversive act. His insights have ignited a crucial discussion about whether India’s tax regime is inadvertently pushing capital away and if tax reforms are necessary to address this growing trend.
