India tax changes prompt need for advice

A rise in India’s income tax surcharge is likely to spur demand for offshore investments, making tax advice more important for high net worth (HNW) investors.

The increase, which is part of the 2019 Budget, would bring the peak income tax rate to super rich individuals earning more than INR50m (US$729,000) to 42.7 per cent.

Data analytics company GlobalData said India already ranked the highest out of 24 countries in high net worth demand for tax advice. It also found only a low proportion of HNW’s wealth was currently held offshore at 16.2 per cent, which is lower than the rest of the Asia-Pacific region.

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Heike van den Hoevel, senior wealth management analyst at GlobalData, said: “Tax efficiency is the prime reason why HNW investors hold wealth abroad. While the importance of this driver is decreasing in most countries in light of the numerous scandals that have shaken the offshore industry, it remains twice as important in India than globally.

“Given the importance of tax as an impetus for holding wealth offshore, this proportion is likely to creep up, with local wealth managers set to compete for a smaller pool of funds. To mitigate the need for HNW investors to channel wealth abroad, wealth managers will do well to up their game when it comes to the provision of tax advice.”

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