Global Indians: The complexities of international wealth
Please note: The article does not constitute advice or any form of recommendation. Barclays Private Bank does not offer tax advice, and professional advice should always be sought.
Not only is the number of wealthy Indians steadily rising, but so too is the amount of wealth which they hold. Recent research showed the total number of ultra-high net worth individuals in the country increased by an impressive 11% year-on-year in 2021, despite the significant challenges presented by the pandemic1.
This domestic success story goes hand-in-hand with an increasing appetite for global mobility, especially as COVID-19 travel restrictions have eased. But the greater the wealth, the greater the complexity with managing it, so where does this leave India’s internationally minded wealth holders?
In the following article, we take a look at some of the recurring themes which we encounter regarding global lifestyles and ambitions.
Knowing the classification guidelines
Every country has its own tax rules and while we don’t advise on tax at Barclays Private Bank, it is nonetheless something we are very cognisant of. When it comes to India, it’s worth keeping in mind that the classification of someone as resident or non-resident Indian (NRI), can change once you dip below a certain number of days spent in the country each year.
There are some exceptions – notably individuals working abroad while on the payroll of an Indian company – but, broadly speaking, those required to pay taxes in another country must become NRIs.
And for new NRIs, it’s not just a change to their residential status that they’ll need to deal with. “There are many complexities when becoming an NRI, from both a tax and exchange control perspective,” says Alexandra Hewazy from Barclays Private Bank.
“But one of the first things you’ll need to do is speak to your bank to change the status of your bank accounts. If you don’t re-classify them to non-resident, then you risk facing hefty fines. For those coming to the UK, there are also things you can do in advance with your pre-UK funds to keep it as ‘clean capital’. As with so many things in life, a bit of advanced planning goes a long way.”
Practical considerations: Visas and immigration
Immigration policy is another hurdle to clear in any move abroad. Whether it’s securing the appropriate visas – through work, family or other options – the process can be time-consuming and complex, but it needn’t be a reason to give up. It’s often about being patient and getting the right support.
Some countries also offer so-called ‘golden visas’, allowing long-term residency for wealthy or highly-skilled foreigners – all without the need of a local sponsor. The UAE, with its large Indian expatriate community, is one such place offering these visas.
The stress of immigration applications can often be eased, if you do your homework and know well in advance what you’re getting into. It’s a topic we covered in our recent article, Moving to the UK: Three things worth planning early.
Charlie Sosna, a London-based partner at international law firm Mishcon De Reya, explains more: “In the short term, families need to be aware that spending too much time in a country like the UK – even on a tourist visa – can trigger tax residency. It’s a common misconception that your visa status defines your tax treatment, but that is not the case. For this reason, some people stay ‘geographically mobile’ during parts of the year, which of course needs careful planning.
“Many clients find they can spend sufficient time in the UK under a visitor visa whilst remaining non-UK tax resident if that is their preference, but they should plan accordingly and take advice so not to slip up on the UK's statutory residence test. Others will wish to ensure that they trigger UK tax residency and look to secure a different visa route in the UK as part of their global planning, but UK advice should be sought in advance to ensure they understand what pre-arrival tax planning they should, do and that they secure the best visa for their long-term intentions at the outset.
“However, if you’re thinking of relocating abroad more long term with a view to obtaining British citizenship, you’ll have to consider the requirement to renounce your Indian citizenship, because India doesn’t allow dual citizenships. For some, that can be an emotional decision to take, and requires careful consideration as to the impact of British Citizenship on any claim to remain ‘non-UK domiciled.”
Finding the right school for your children
A further consideration if you’re moving overseas with your family is what to do about schools. If your new country is a long way from home, it may be hard to assess the education options on offer before you arrive.
Of course, every child is different and every school system is different, which is why picking the right school has always been one of life’s big decisions.
Before searching, you might want to ask yourself: Does your child thrive in a highly academic environment, or one with strong sports and creative facilities? Is the curriculum aligned to their interests and needs? Or should you consider an international school, especially if English isn’t your first language and you want your child to be with children in similar circumstances. There are also the entrance exams to consider – and the best time of year to make your move so your child fits into the new school’s rhythm seamlessly.
We won’t linger on this here but if you do want more information, then our article from earlier in the year might be of interest, Moving to the UK: How to choose the right school for your child.
Many Indian investors have a significant ‘home bias’, with most of their holdings deriving from domestic markets. And while India has been a high-growth emerging market for a number of years now, favouring the familiar can also lead to an over-concentration of assets in one area – undermining the well-established benefits of diversification.
“It’s also not helped that the avenues for investing ‘offshore’ in India are quite restrictive, and traditionally Indian residents have had limited access to global markets,” says Narayan Shroff, Director at Barclays Private Clients India.
“So, of course, moving abroad potentially allows you to allocate more of your portfolio globally and to diversify your investments. It also means you could tap into a broader range of investment opportunities. It’s not just equities, bonds and mutual funds to invest in, there’s also the alternatives space to explore – potentially using private markets and hedge funds, in parallel with more traditional asset classes.
“However, if you are relocating abroad then you can’t just move and change your entire investment portfolio on day one. Because of Indian regulations, you’d have to stagger it – and this can take many years.
Shifting to another country can also mean exposure to different tax regimes and also currency risk.
“At a bare minimum, you’re going to need to review your investment portfolio – keeping global investing in mind.” adds Shroff.
Indian wealth holders are increasingly mobile, with international ambitions in their personal and work lives. Large wealth is invariably complex to manage but the complexity increases when lifestyles become more global, and no longer uniquely based in India.
As Poonam Mirchandani, from Barclays Private Bank India, explains: “Indian families are now global Indians in their outlook, as such it is important that any planning for them is always viewed through a triagonal lens – seamlessly covering succession and intergenerational transfer of wealth, global mobility, and asset diversification. With the complexity of laws in India, especially foreign exchange and tax, advanced planning is critical to a successful outcome.”
This communication is general in nature and provided for information/educational purposes only. It does not take into account any specific investment objectives, the financial situation or particular needs of any particular person. It not intended for distribution, publication, or use in any jurisdiction where such distribution, publication, or use would be unlawful, nor is it aimed at any person or entity to whom it would be unlawful for them to access.
This communication has been prepared by Barclays Private Bank (Barclays) and references to Barclays includes any entity within the Barclays group of companies.
(i) is not research nor a product of the Barclays Research department. Any views expressed in these materials may differ from those of the Barclays Research department. All opinions and estimates are given as of the date of the materials and are subject to change. Barclays is not obliged to inform recipients of these materials of any change to such opinions or estimates;
(ii) is not an offer, an invitation or a recommendation to enter into any product or service and does not constitute a solicitation to buy or sell securities, investment advice or a personal recommendation;
(iii) is confidential and no part may be reproduced, distributed or transmitted without the prior written permission of Barclays; and
(iv) has not been reviewed or approved by any regulatory authority.
Any past or simulated past performance including back-testing, modelling or scenario analysis, or future projections contained in this communication is no indication as to future performance. No representation is made as to the accuracy of the assumptions made in this communication, or completeness of, any modelling, scenario analysis or back-testing. The value of any investment may also fluctuate as a result of market changes.
Where information in this communication has been obtained from third party sources, we believe those sources to be reliable but we do not guarantee the information’s accuracy and you should note that it may be incomplete or condensed.
Neither Barclays nor any of its directors, officers, employees, representatives or agents, accepts any liability whatsoever for any direct, indirect or consequential losses (in contract, tort or otherwise) arising from the use of this communication or its contents or reliance on the information contained herein, except to the extent this would be prohibited by law or regulation.