Global billionaires as well as ultra-high-net-worth (UHNW) individuals from India are now setting up their family office branches abroad. A Henley & Partners (H&P) research suggests that 8000 of India’s richest migrated out of the country this year. The report also indicates that the trend will continue in the upcoming years as India will have a hard time keeping the riches in the country.
Among other places, billionaires from India now have two new destinations to establish their home branch offices -- Dubai and Singapore. For instance, Krishna Kumar Bangur, the chairman of Graphite India, who originally hailed from Kolkata’s Bangur clan, is now a proud resident in Singapore. The chairperson from the Landmark group Micky Jagtiany is also living in Dubai. Apart from these two, business tycoons like Adar Poonawalla and Hinduja Group are also living outside of the country.
The latest to join the club is Reliance Industries (RIL) chairman and managing director Mukesh Ambani who is reportedly setting up his family office in Singapore.
Ambani, Asia’s second-richest man, has appointed a person to head it and his first family office outside the country is expected to be up and running in 10-12 months.
This triggers a pertinent question, why is the most creamy section of the Indian economy moving out of the country?
Multiple reasons can be taken into consideration behind this high-class exodus. The primary is that UHNIs are exploring the family office route to manage their wealth and Dubai, Singapore, and Canada have emerged as some preferred destinations to set up offices.
High Tax Rates
One of the major reasons behind the migration of Indian billionaires can be the high tax rates on personalised income. As Saraswathi Kasturirangan, partner at Delloite India argues in The Economic Times (ET) “With a 37% surcharge over a 30% tax rate in India, the maximum marginal rate is as high as 42.74%. While reducing tax rates for individuals should be a priority, the number of days’ stay in the country for taxing global income in India is also crucial.”
To avoid such a high rate of taxation, Indian business icons are preferring to leave the country and set their places elsewhere.
Exploring The Foreign Markets
In terms of building a good consumer base overseas, business icons are seeking the path to move outside India.
Why Singapore and Dubai Are Attracting Billionaires?
Several Indians are setting up family offices overseas, including Singapore and Dubai due to lower capital gains tax and greater ease of doing business, among other reasons.
The emergence of Singapore as an international financial hub with a strong regulatory framework is the key reason for Indian billionaires to move out. In comparison with India’s 30 per cent corporate tax rate, Singapore offers only 17 per cent. Hence, the number of family offices in Singapore jumped fivefold between 2017 and 2019 and almost doubled from 400 at the end of 2020 to 700 in 2021. Besides, the strong legal system and easy access to world-class financial advisors are other reasons for the rich to explore the place.
Apart from Singapore, Dubai is another destination among the rich. In August this year, the Dubai International Financial Centre’s Authority Board approved the opening of a Global Family Business and Private Wealth Centre in the UAE.
The UAE recorded a net inflow of more than 2,000 millionaires in 2021, and more UHNW families are setting their sights on the UAE as a home for their Family Offices.
About 41 per cent of the UAE’s wealth in 2021 was derived from UHNWIs and this share is expected to grow to 43 per cent in 2026, a Boston Consulting Group report said.
Can GIFT City compete with Dubai, and Singapore?
In a bid to set up a global financial hub, India is looking to attract the billionaires of the world to its GIFT City. The GIFT city is built on 886 acres and has a multi-service Special Economic Zone (SEZ). It is home to India’s first International Financial Services Centre and also has a Domestic Tariff Area (DTA).
In July, Prime Minister Narendra Modi said GIFT City should be a centre of excellence that will rival the continent's credentialed money hubs,
.“I want GIFT to be a gateway for global equity and debt capital for sustainable development,” Modi said, adding, “GIFT should compete with the centres in Dubai and Singapore.”
To counter this unabated export of Indian capital to such international financial centres, India has established its own IFSC at GIFT City, Gandhinagar to develop a global financial centre in India, rivaling the likes of Singapore and Hong Kong.
India is trying to become a marketplace for foreign currency-denominated contracts. The GIFT City offers a slew of tax breaks but has very little customer liquidity.
In the last few years, various tax incentives, exemptions, and relaxations have been provided to create a level playing field for GIFT IFSC to compete with other IFCs.
