India has one of the largest and most influential diasporas in the world, with over 35 million people of Indian origin living abroad. Among them are a significant number of High-Net-worth Individuals (HNIs) who have built their wealth through business, investments, and professional success abroad.

Many of them would have returned to India if not for its unfavourable tax policies. Instead of leveraging their wealth for economic growth, India’s tax framework acts as a deterrent, preventing the country from fully benefiting from its global diaspora's financial and intellectual capital.

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Indian taxation laws are particularly harsh for returning NRIs. They become liable for the taxation of their entire global income, including wealth accumulated entirely outside India over their lifetime. This leads many wealthy NRIs, successful entrepreneurs, and investors to remain abroad, despite their inclination to return, due to excessive taxation and bureaucratic scrutiny. As such, Indian income is always taxable in India, whether resident or non-resident.

As a result, NRI wealth, investments, and spending remain outside India, depriving the country of potential economic benefits. If HNIs and wealthy NRIs were to relocate, they would significantly boost the economy through high-value consumption - healthcare, education, entertainment, luxury goods, real estate, and automobiles. Their contributions to philanthropy and investments in startups, infrastructure, and financial markets would further drive innovation and social progress.

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A simple policy shift exempting returning NRIs foreign income and investments from taxation while continuing to tax all past and future Indian-sourced income could unlock billions of dollars in investment and spending. It would strengthen foreign exchange reserves, accelerate GDP growth, and increase tax revenues without any downside, because today India gets nothing from this fraternity. A win-win for India, yet currently ignored.

Encouraging wealthy NRIs to return is not just about taxation; it is about economic expansion, investment, and creating a thriving high-value consumer base. India has the potential to be a global wealth hub, but short-sighted tax policies are driving away its own HNIs and entrepreneurs.

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A pro-NRI tax framework for returning Indians could unlock billions in GDP contributions, create new businesses, and enhance India’s appeal as a destination for talent and wealth. It’s time for policymakers to recognise returning NRIs as an asset, not a liability.

If India does not act, other countries will continue to benefit from the wealth, talent, and economic power of Indians living abroad.
(The writer is the Executive Chairman of the IBS Group)

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