More & more rich leaving India in search of better investment opportunities

Wealthy Indians are increasingly domiciling their families and businesses overseas for better investment opportunities, wealth preservation, lifestyle, and health care. Some of the most sought-after residential visas are for countries, such as the US, the UK, Portugal, and Greece. These jurisdictions provide various investment options, as well as attractive returns on real estate. 

“After the lull in immigration programmes during the initial phases of the pandemic, we are now seeing more and more families evaluating alternative residencies and citizenship programmes,” said Shilpa Menon, senior director, India, LCR Capital Partners, a US-based private investment and advisory services firm. “With plenty of choices, choosing the right jurisdiction and project to invest in can be overwhelming. A good project will have strong immigration benefits, as well as robust investor protection mechanisms.”

Until a few years ago, the investment migration industry in India revolved around Australia, Canada, the UAE, the UK, and the US, but there is now a growing interest in residence-by-investment programmes in Europe.   

“A significant driver of this trend are investors seeking alternative residence or citizenship as a means of hedging sovereign risk. While India is a dynamic place for business activities and commercial growth, with high-yielding investments, it is less so from a wealth preservation perspective. India is not alone in facing an unprecedented financial crisis owing to Covid-19 but its financial institutions — while doing an exceptional job — need to build more trust on the longevity of the solutions they offer for generational wealth preservation,” said Juerg Steffen, CEO, Henley & Partners, a global residence and citizenship planning firm, in a note. 

Tax implications 

Individuals and families, however, have to navigate a maze of tax and regulatory hurdles for making the shift.

Repatriating investments from India to an overseas jurisdiction, frequent travel to India for business and social purposes, risks of POEM (place of effective management) in overseas jurisdictions for businesses in India and vice versa, control over co-owned businesses in India, creation of family trusts in India or overseas, and externalisation of India businesses are some of the common challenges. 

“Complications increase when tax and regulatory aspects are sought to be aligned to the commercial and personal objectives of wealthy individuals or families. For instance, those who have moved to Europe will not be able to control businesses in India because of the distance and time difference. For such HNIs, shifting economic activities outside India by creating regional hubs for businesses is a better option,” said Yashesh Ashar, partner, Bhuta Shah & Co.

An Indian resident is required to ensure that he/she stays not more than 120 days in India after immigration to qualify as a non-resident in India. Further, he/she would also be required to obtain a tax residency certificate from the tax authorities in the new jurisdiction to claim treaty benefits of the income sourced from India, as well as credit of the taxes paid in India.  “The requirement of 120 days becomes 181 days if the income sourced from India is less than Rs 15 lakh. So, many HNIs are looking at shifting their income streams outside India to ensure they are eligible for a 181-day stay in India,” said Ashar. 

According to him, obtaining a TRC (tax residency certificate) is important as one has to be liable to tax in another country and be its resident to claim non-resident benefits in India. "Global travellers whose stays in various countries are restricted to 30 or 60 days will not be able to meet the criteria for residential status in any of those countries,” Ashar said. 

Resident individuals can remit up to $250,000 a year outside India under the Liberalised Remittance Scheme. In case, investment limits in other countries are higher, this limit can be extended by clubbing the limits of family members. However, utilisation of these monies for the acquisition and set-up of companies outside India is subject to additional conditions.