Advanced Tax Planning Strategies For High Net Worth Individuals

Who doesn’t aim to preserve wealth through tax savings?  As a high net-worth individual in India, staying updated with the latest tax regulations and proactively planning your tax strategy can help you preserve wealth by improving your tax efficiency. In this article, we will explore the tax-saving strategy you could adopt as a high-networth individual in the existing tax landscape of India. 
 

Understanding the Existing Tax Landscape in India

The existing tax structure in India presents several tax-saving opportunities for high-net-worth individuals. Let's examine the existing tax landscape in India (for individuals).
 

• Individuals earning an income of INR 10 lakhs and above are placed in the highest tax bracket of 30%. 
   
• The Income Tax Department imposes a tax (at 10%) for long-term capital gains made more than INR 1 lakh. Please note that an investment held for a period exceeding one year qualifies for LTCG (Long Term Capital Gains Tax).
   
• As per the existing taxation rules in India, you are not required to pay inheritance tax for inheriting properties or assets. However, you need to present a declaration of your inheritance if you plan to sell off your inheritance. 
   

In summary, tax planning becomes imperative for a high-net-worth individual in India with an annual income exceeding INR 10 lakhs and long-term capital gains exceeding INR 1 lakh by a great margin.  

Please note that the figures and statistics included here are in accordance with the Annual Statement of Account presented by the Government of India in the parliament in February 2024. As an aware individual, it would be prudent for you to keep track of the revisions in the tax regulations made by the Government. 
 

Tax Saving Investment Avenues For HNIs 

Let us have a look at promising tax-saving investment avenues for HNIs.
 

Tax-Free Government Bonds 

Bonds issued by the government for key areas of economic importance, such as housing and infrastructure bonds, are tax-free in nature. For sizable investors such as HNIs, investing in tax-free government bonds is one of the better ways to lower their overall tax liability.   
 

Captive Insurance 

As an HNI, investing in captive insurance holds excellent promise. By investing to cover your personalized and specific risks, you not only get a shield for these risks, but you also get to avail yourself of tax benefits. While the premiums you pay are eligible for tax benefits, the profits you make are taxable at lower rates. 

In summary, given the existing tax landscape in India, HNIS must plan their tax savings proactively. There are myriad tax-saving opportunities for the vigilant among such investors. In this blog post, we’ve just begun scratching the surface.   
 

Smart Wealth Transfer Strategies 

There is no inheritance tax on the transfer of assets and properties in India. However, as an HNI, you can have residence in more than one country. In that case, you need not give up on tax savings on your wealth transfers. Let us quickly look at some of the most innovative wealth transfer strategies. 
 

Gifting 

Gifting out of your regular income qualifies for tax exemptions in most countries. Using strategic monetary gifting could lower your overall inheritance tax liability. 

Charitable Trusts 

Investing in Charitable Trusts (Donations) can help you attain two benefits in one stroke. You qualify for tax exemptions under Section 11 of the Income Tax Act 1961. You also get to fulfil your philanthropic objectives. Most HNIs see charitable trusts as an inseparable part of their legacy. It is a way of giving back to society without suffering an erosion of the existing wealth. 

Final Words

With great wealth comes significant responsibilities. High Networth Individuals possess sizable amounts of assets. Following the regular path as a HNI in India, you could end up eroding a sizable portion of your wealth because of taxes. In this article, we’ve explored the prudent tax planning methods for such individuals in India.