How Indian Traders Avoid Paying Taxes LEGALLY!
Summary
TLDRIn 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.
Outlines
😲 Tax Evasion Strategies of the Wealthy in India
In this paragraph, PR Sundar discusses how some high net worth individuals (HNIs) in India avoid paying taxes by exploiting loopholes. He uses the example of borrowing money and the varying consequences based on the amount, to illustrate the disparity in how different social classes are treated by the tax system. Sundar contrasts his own frugal spending habits with the extravagant lifestyle of some tax avoiders, such as the high cost of a jacket worn by a member of the Nero media. The speaker also touches on the cultural and economic ties between India and two countries, Singapore and Dubai, and how the latter's tax-free status and currency stability attract these individuals to set up financial operations there. The paragraph ends with the mention of the Golden Visa in Dubai, which offers a 10-year residency to those who meet certain financial criteria, and how this is used by some HNIs to maintain a tax-avoiding lifestyle.
💼 Exploiting Tax Treaties and NRI Status for Tax Avoidance
This paragraph delves into the specific strategies used by ultra-high net worth individuals (UHNIs) to avoid paying taxes in India. It explains how these individuals use the tax residency certificate from Dubai, in conjunction with the double taxation avoidance treaty between Dubai and India, to avoid paying taxes on their income. The speaker shares anecdotes from his visit to Dubai, where he learned about the common practice of using tax residency certificates to evade taxes. He also mentions the legal ambiguity surrounding this practice, with some chartered accountants in India suggesting that taxes should still be paid on income derived from trading in futures and options. The paragraph concludes with the speaker's personal reluctance to engage in such practices due to the potential for future legal repercussions.
🏦 Legal Frameworks for Tax-Free Trading in India
In the final paragraph, the speaker explores legal methods for tax avoidance in the Indian derivatives market. He explains the process of registering as a foreign portfolio investor (FPI), which allows for tax exemption on derivative income in India. The speaker also discusses the strategy of giving up Indian citizenship to become a foreigner and setting up a company in Dubai, which can then register in India as an FPI. This setup enables the individual to trade in derivatives without paying taxes to the Indian government. The paragraph also touches on the complexities of transferring money legally from India to Dubai for trading purposes, mentioning the Liberalized Remittance Scheme (LRS) and the challenges of round-tripping funds. The speaker concludes by offering assistance to those interested in pursuing these legal tax avoidance strategies, while emphasizing the importance of operating within legal boundaries.
Mindmap
Keywords
💡Tax avoidance
💡HNIs (High Net Worth Individuals)
💡ANRO account
💡Double taxation avoidance treaty
💡NRI (Non-Resident Indian)
💡Derivatives trading
💡Foreign Portfolio Investors (FPIs)
💡Golden Visa
💡Citizenship by investment
💡Liberalized Remittance Scheme (LRS)
💡OCI card
Highlights
PR Sundar discusses how some HNIs (High Net Worth Individuals) avoid paying taxes in India while still making money.
The contrast between the consequences of borrowing small versus large amounts of money, and the implications for individuals and banks.
The case of Vijay Mallya and the Era Moody incident, highlighting the disparity in how the wealthy are treated compared to the middle class.
PR Sundar's personal anecdote about his spending habits on clothing, emphasizing the difference between his lifestyle and that of the ultra-rich.
The joke about the treatment of petty criminals versus those who commit large-scale financial crimes, reflecting societal and legal biases.
The focus on Singapore and Dubai as popular destinations for tax avoidance due to their proximity to India and cultural ties.
Dubai's appeal as a tax-free country and its currency's stability linked to the US dollar.
The safety and cultural familiarity of Dubai, along with the availability of the Golden Visa for residency.
The strategy of HNIs using the Golden Visa to shuttle between Dubai and India to establish tax residency and avoid taxes.
The use of ANRO (Annual Non-Resident Ordinary) accounts by NRI (Non-Resident Indian) tax residents to trade in derivatives and avoid taxes.
The conflict between the experiences of Dubai residents who avoid taxes and the advice of Indian Chartered Accountants on tax liabilities.
The legal method for avoiding income tax on derivative income by registering as a Foreign Portfolio Investor (FPI) in India.
The practice of giving up Indian citizenship to become a foreigner and setting up a company in Dubai to trade as an FPI.
The challenges and methods of transferring money from India to Dubai for trading purposes within legal frameworks.
The Liberalized Remittance Scheme (LRS) as a potential legal method for transferring money abroad, with limitations.
PR Sundar's personal contemplation on relocating to Dubai and registering as an FPI to save on taxes, considering legal and practical aspects.
The offer of assistance for those interested in legally structuring their finances to minimize tax liabilities, with a disclaimer against illegal activities.
Transcripts
hi this is PR Sundar welcome to this
special episode
I'm going to talk how some hnas avoid
paying tax in India and they make money
and still avoid paying tax the people
say just for fun you know you borrow a
small amount of money you will be in
trouble and if you borrow a big amount
of money from a bank then the bank will
be in trouble so the problem is not for
the individual is for the banks and you
know what happened in case of an era
Moody uh Vijay Malaya somewhere I read
you know Nero media was wearing a jacket
it cost more than 5 lakh rupees and look
at my shirt I've never spent more than
thousand rupees in my lifetime for my
shirt so the maximum I spend is only
about 700 800 rupees per shirt still
those who are wondering where I'm
getting all these designer shirts so I
buy these shirts from Singapore
and uh you know whatever shirts I'm
wearing they are all unbranded shirts
only and nothing is branded if I'm
wearing any branded shirt now that means
somebody has gifted me so I never buy
one apart
you know uh there's another joke also
people say you do some petty crime the
police will uh hit you using their boots
and uh you know if you rob billions of
dollars and then the police will uh
clean your boots generally
diplomatically putting you know in most
of the countries uh it is only the
middle class people who suffer the low
class people there they don't pay tax
high class people also they don't pay
tax they know how to avoid it so it's
always the suffering of middle class
just I'm coming back to my topic how
some ultrasonic lens avoiding tax the
first thing is that you know there are
only two countries which are nearer to
India three to four hours of flight
and culturally closely associated with
India so one is Singapore other one is
Dubai and of course Singapore is very
expensive but Dubai is relatively very
cheap first thing is that people choose
Dubai
why people choose to Dubai number one
it's a tax-free country we can't say tax
free is a zero tax you pay tax but you
pay zero tax so I was told tax free and
zero tax they both are different
uh details will come later Singapore
there is a taxation
so first thing is that Dubai is tax free
country and number two Dubai currency uh
they said they run uh expect with the
dollar that means it will never
depreciate against the dollar when the
dollar appreciates automatically so this
currency is packed with the dollar also
appreciates I know few countries one is
the Dubai the other one is Hong Kong
these two countries have picked their
currency with US dollar and then you
know uh it's a safe country crime rate
is less and then you know culturally
associated with India few hours flight
from India flight tickets are cheap and
also people can get residency Visa there
is something called Golden Visa so
that's a 10-year Visa so if you are
working if you are getting a salary of
30 000 Dirham per month you get a golden
Visa or if you buy a property for 2
million Dirham so that's about 4.5 crore
in Indian currency even with a bank loan
you are still eligible for uh golden
Nissan so until recently it's 2 million
Dirham from your packet but now even
with the 2 million Dirham even with a
bank loan also eligible what some of the
hni clients do uh you know assume that
there are so many family members father
mother brother sister you know so many
people just one person is being settled
in Dubai how uh they just gone by some
property they get the golden Visa
and then no no they stay in Dubai for
two weeks three weeks then come back to
India stay here for two weeks three
weeks again go back to the way stay for
two weeks three weeks so like this they
shuttle between Dubai and India at the
end of the year
in One Financial year for more than six
months they stay in Dubai that's because
you know if you want to be a tax
resident of any country you have to stay
in that country for more than 180 days
so then only you get the tax residency
certificate you are a tax resident of
Dubai what happens you know so the
people stay one of the family members
stay in Dubai for more than six months
so effectively he is considered as NRI
in India because any person who is
staying abroad more than six months is
considered as an NRI of course there are
some nitty-gritties recently they've
changed to eight months but eight months
or six months you know there are certain
uh exceptions so then what happens this
guy open an anro account in India and
means non-resident ordinary account so
put the money into that account and then
start trading in derivatives Futures
options you know at the end of one
Financial year so they have to file the
tax return while filing the tax return
what this per person do he gets a tax
residency certificate from Dubai and he
submitted to the income tax department
of India and so because there is a
double taxation avoidance treaty between
Dubai and India so these people do not
pay any tax this is how Ultra hna claims
save tax recently when I went to Dubai I
spoke to some clients I spoke to some
Brokers I spoke to some bankers also
so they all told me the same story if
you get a tax residency certificate of
Dubai then you do not have to pay tax to
Indian government and in fact I met some
people who have been filing the tax
return in India for the last three four
years but they have not been paying tax
and they are showing their tax residency
certificate but however when I talk to
some of the Chartered Accountants in
India so their story is different they
say that you know even if you are a tax
resident of Dubai if you are pre-trading
in Futures and options you still have to
pay tax in India as far as now what I
know there are many people who are
enjoying this double taxation avoidance
treaty and the white tax residency
certificate and they are not paying tax
and they have not been questioned by
income tax department so far
so that is one thing then you know I do
not want to operate in a gray area so as
one of my friends so like you know I I
don't want you know income tax
department don't question me uh after 10
years they come and question me then
they asked me to pay for the 10 years
along with interest and I don't want to
get into these things
so is there any 100 legal way without
any gray area a person can trade in
Indian derivatives market and yet do not
pay income tax
so the answer is yes
so all you have to do you have to
register yourself as a foreign portfolio
investors in India we call it as FIS
foreign institutional investors but now
they change the definition to foreign
portfolio investors
and these people they do not pay any
income tax for their derivative income
in India
however for the cash Market profit they
have to pay capital gain tax for
derivative income so they don't have to
pay the tax to Indian government what
some people I know one guy what he has
done
so the family there are so many people
so one person you know what he did he
gave up Indian citizenship he took a
citizenship in one of the countries
there are few countries in the world you
buy property for two three crore they
give you citizenship
or even that is also not required you
just give some donation to the
government and they give you the
citizenship so what happens they give up
Indian citizenship and they took they
take citizenship of those countries like
Saint Gates
like that okay so I think earlier I've
come out with a video why so many uh hni
people giving up Indian citizenship and
in fact that news is the one triggered
me to do all these things so what
happened so this guy became a foreigner
so if you say foreign portfolio investor
you should not be an Indian you have to
be a foreigner actually I am also a
foreigner right but the thing is uh I'm
holding oci card I am treated at par
with NRI
so for all practical purposes I am not a
foreigner I am a NRI moreover I stay in
India for more than 180 days
irrespective of my citizenship I am
becoming a tax resident of India if I
want to be a foreigner
uh there are two things I have to do one
I have to give up my OCA card
and then every time I want to come to
India I have to get the visa and second
thing I have to stay outside India for
more than six months so then a person
becomes a pure Foreigner
and then so this guy a foreigner will
have to set up a company you know in any
country but people choose Dubai because
it's a tax-free country so one member in
a family give up Indian passport get a
foreign passport then set up a company
in Dubai and in that company this guy
will have to have minimum 51 percent
shareholding the remaining 49 percent
shareholding can be held by nris again
each NRA cannot hold more than 24
percent
what normally people do they choose two
friends two NRA friends so this
Foreigner take 52 percent those two nras
for 24-24 percent so they get 100
percent
so they set up a company so they bring
the funds to that company and then this
company register in India as a foreign
portfolio investor
and then they bring the funds to this
company and they start trading in
derivatives so then they become foreign
portfolio investor and they do not have
to pay tax to Indian government
so although I gave you the modest
opportunity uh how how people do
but there are a lot more nitty-gritties
actually
uh number one
uh how to transfer the money from here
so mostly you know what these people you
know they have friends NRA friends so
they borrow money from the NRI friends
and then that is how the funds come to
India
but otherwise the money from India
cannot go abroad for the purpose of
derivative Trading and particularly for
Indian derivative trading because you go
money goes from here to abroad and then
again coming back to India so that is
called round tipping the income tax
people so which is totally not allowed
so there are ways and means you know
people are transfer money but legally
transferring money from India to abroad
for the purpose of speculative trading
or trading in derivative markets or
buying lottery ticket is not allowed
so there is a scheme called LR scheme
liberalize the remittance scheme whereby
a person can transfer up to 2.5 lakh US
dollars per person per Financial year
but with the specific objectives oh hi
I'm also thinking now because I am a
foreigner so why not I give up my OCA
card why not I relocate to Dubai so why
not I register as a foreign portfolio
administer so that I can save taxes but
then again the money from here it cannot
be transferred but you know so many
anaras will give money to me so even
without interest you know so by God's
grace I have a lot of people who will be
willing to help me so all kinds of
things can be at that although I have a
base in Singapore
uh but I'm because Singapore is a again
it's a taxation is there it's more
expensive so we are looking at Dubai as
an alternate
so
uh you know uh if any of you uh need
some more information
if you want to do this
of course you can contact us our office
numbers are given in the description
uh so we will be glad to help you so of
course we will expect you to pay
something for us for the services that
we are giving
uh and another thing you know please
don't call us if anything you want to do
illegally but you know we want to do
everything legally okay
so
uh I hope you uh understood how legally
Ultra hna cleanse uh make money and yet
they do not pay tax
hope you enjoyed watching this video
thank you for watching
thank you
foreign
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