How Indian Traders Avoid Paying Taxes LEGALLY!

Summary

In this special episode, PR Sundar discusses the tactics used by some high net worth individuals (HNIs) to avoid paying taxes in India. He explains how they leverage Dubai's tax-free status, currency stability, and cultural ties to India to establish residency and trade in derivatives without incurring taxes. Sundar also mentions the legal alternative of registering as a foreign portfolio investor to avoid taxes on derivative income. The video offers insights into these tax-saving strategies while emphasizing the importance of operating within legal boundaries.

Takeaways

• 😀 The video discusses how some high net worth individuals (HNIs) avoid paying taxes in India by using various strategies.
• 🤔 The speaker contrasts the consequences of borrowing small versus large amounts of money, highlighting the different impacts on individuals and banks.
• 💰 The video mentions the case of Vijay Mallya and the Nirav Modi scandal, indicating the disparity between the lifestyles of the rich and the legal consequences they might face.
• 👕 The speaker emphasizes their own frugality in comparison to the extravagant spending of some HNIs, using the example of designer clothing.
• 🛍️ The strategy of purchasing unbranded shirts from Singapore to avoid high costs is highlighted as a personal finance tip.
• 🏦 The video explains that HNIs often choose Dubai for its tax-free status and currency stability linked to the US dollar.
• 🇦🇪 Dubai's Golden Visa program is mentioned as a way for HNIs to gain residency, allowing them to split their time between India and Dubai for tax purposes.
• 📈 The use of Non-Resident Ordinary (NRO) accounts and the exploitation of double taxation avoidance treaties to avoid paying taxes in India is described.
• 📊 The video suggests that by registering as a Foreign Portfolio Investor (FPI), one can legally trade in the Indian derivatives market without paying income tax on derivative income.
• 🏦 The process of setting up a company in Dubai with a foreign passport, having majority shareholding, and trading as an FPI to avoid taxes is outlined.
• 🚫 The video emphasizes the importance of staying within legal boundaries and avoiding grey areas when it comes to tax strategies.

Q & A

What is the main topic of the video?

The main topic of the video is how some high net worth individuals (HNIs) avoid paying taxes in India while still making money.

What is the significance of the statement about borrowing money and the resulting trouble for individuals and banks?

The statement highlights the irony that small debts can cause personal trouble, while large debts can cause systemic issues for banks, suggesting a disparity in the way financial responsibility is managed at different scales.

Why does the speaker mention the cost of their shirt and the jacket worn by Nero Media?

The speaker uses the cost of their shirt and the jacket worn by Nero Media to illustrate the contrast between ostentatious wealth display and their own modest spending habits, possibly to establish credibility or to make a point about wealth and consumption.

What is the role of Dubai and Singapore in the tax avoidance strategies discussed in the video?

Dubai and Singapore are presented as locations culturally close to India with different tax regulations. Dubai is highlighted as a tax-free country, and Singapore has taxation, but both offer opportunities for tax avoidance due to their proximity and cultural ties.

What is the 'Golden Visa' mentioned in the video?

The 'Golden Visa' is a 10-year residency visa offered by Dubai to individuals who meet certain criteria, such as earning a certain salary or investing in property, which can be used for tax residency purposes.

How can staying in Dubai for more than six months affect an individual's tax status in India?

Staying in Dubai for more than six months can make an individual a tax resident of Dubai, which, due to the double taxation avoidance treaty between Dubai and India, can exempt them from paying taxes on certain incomes in India.

What is the significance of the ANRO account in the context of tax avoidance?

An ANRO (Any Person Resident Outside India) account allows non-residents to deposit funds and engage in financial activities without being subject to Indian taxes, which is part of the tax avoidance strategy discussed.

What is the legal way mentioned in the video to trade in the Indian derivatives market without paying income tax?

The legal way mentioned is to register as a Foreign Portfolio Investor (FPI) in India, which exempts the individual from paying income tax on their derivative income in India.

Why might someone give up their Indian citizenship to become a foreigner for tax purposes?

Giving up Indian citizenship and becoming a foreigner allows the individual to set up a company in a tax-free country like Dubai, and then register as an FPI in India, which can exempt them from paying taxes on their derivative income.

What is the Liberalized Remittance Scheme (LRS) and how does it relate to transferring money abroad?

The LRS is a scheme that allows individuals to transfer up to $250,000 per financial year abroad for specific objectives. However, it cannot be used for speculative trading or buying lottery tickets, which is relevant to the discussion of legally transferring money for trading purposes.

What is the speaker's stance on operating in a 'gray area' for tax purposes?

The speaker expresses a desire to avoid operating in a 'gray area' and to conduct everything legally, indicating a preference for clear and transparent methods to avoid taxes.