In April 2018, a panel was set up by the Income Tax department to look into the taxation implications arising out of high net worth individuals (HNWIs) who are migrating to settle abroad, and also to arrive at the country’s stand on this issue.
The Central Board of Direct Taxes set up a five member working group to examine the taxation aspects of HNWIs and provide a solution to the matter. For this purpose, the group will also take into account global tax practices.
In a letter, the CBDT said that such individuals pose a substantial tax risk as they may treat themselves as non-residents for taxation purposes, even though they may have strong economic and personal relations with the country.
Over the past few years, the government has started levying higher taxes on the super rich or the ones earning over ` 1 crore a year to ensure equitable taxation, which is a progressive step. Consequently, many HNWIs have fled or are fleeing the country after defaulting on loans and taxes, which is not a desirable outcome at all.
Notably, 23,000 dollar millionaires have left India since 2004, the highest in terms of percentage among all countries. As per Morgan Stanley Investment Management data, 7000 millionaires left India in the year 2017 alone. Due to this, the economic benefit of investments and consumption by these super rich may be lost.