Tax Planning for High Net-Worth Individuals (HNIs) in India

Introduction

As income and assets grow, so do the complexities of managing and planning taxes. High Net-Worth Individuals (HNIs) in India often face multiple tax liabilities across income sources, asset classes, and geographies. Proper tax planning for HNIs in India requires a strategic approach that not only ensures compliance but also optimizes tax outgo and preserves wealth.

At Makwana Sweta & Associates, a trusted team of Chartered Accountants in Mumbai, we specialize in tailored tax solutions for HNIs. Here’s a comprehensive 2025 guide to help you stay ahead.

Who Qualifies as a High Net-Worth Individual (HNI)?

There is no formal definition, but in financial and wealth management circles:

Individuals with net assets over Rs. 5 crore, or
Annual income above Rs. 50 lakh, or
Investments exceeding Rs. 1 crore

are generally considered HNIs.

Key Challenges Faced by HNIs in Tax Planning

Multiple income streams (salary, capital gains, rent, business)
Cross-border income and foreign assets
Higher tax rates (30%+ surcharge and cess)
Complicated compliance (Schedule FA, ITR-2/3, Form 67)
Risk of scrutiny under Black Money Act or FEMA

Income Tax Slabs & Surcharge (FY 2024-25)

For individuals opting for the old regime:

30% on income above Rs. 10 lakh
10% surcharge on income above Rs. 50 lakh
15% surcharge on income above Rs. 1 crore
25%+ surcharge on income above Rs. 2 crore

Effective tax rate can go above 42.74% in some cases

1. Use of Exempt Incomes

HNIs can legally reduce taxable income by leveraging exempt incomes:

Long-term capital gains on listed equity up to Rs. 1 lakh (Section 112A)
Agricultural income (if applicable)
Tax-free bonds (REC, NHAI, etc.)
PPF and Sukanya Samriddhi Yojana (for eligible family members)

2. Tax-Efficient Investment Strategies

Invest via Indexation-friendly debt funds (3+ years)
Opt for ULIPs (under Section 10(10D), subject to premium cap)
Use Alternative Investment Funds (AIFs) and REITs/InvITs wisely
Choose Capital Gain Bonds (Section 54EC) for real estate gains

3. Family Tax Planning & Income Splitting

Invest in the name of spouse/major children
Form HUF to reduce personal tax liability
Use gifting provisions under Section 56(2) for income diversification

4. Foreign Asset & Income Disclosure

File Schedule FA and Form 67 for foreign income/tax credit
Avoid penalties under Black Money Act (BMA)
Consider DTAA benefits for global income

Tip: Use professional help to avoid errors in foreign disclosure

5. Trusts & Estate Planning

HNIs should consider:

Creating Private Trusts for asset protection and succession
Establishing Wills and Nomination Structures
Using Family Office services for multi-generational planning

6. Use of Business Entities

Channel income via LLP or Private Limited Company for lower tax rate (22%)
Claim legitimate business expenses to reduce net profit
Consider remuneration and dividend optimization

7. Tax Audit & Advance Tax Compliance

File advance tax on time (June, Sept, Dec, March)
Get tax audit done under Section 44AB if business income exceeds limits
Track and reconcile Form 26AS and AIS data

Final Words

For HNIs in India, tax planning isn’t just about saving tax — it’s about preserving capital, ensuring compliance, and enabling future wealth creation.

At Makwana Sweta & Associates, our HNI advisory combines taxation, wealth management, and legal structuring to give you a 360° view of your finances.

Need expert help with tax planning for HNIs in India? Reach out for personalized, discreet, and effective strategies.

Useful Links

Outbound Link: SEBI Regulations for HNIs
Inbound Link: Learn how to manage taxes on investments such as Crypto and Foreign Stocks.