Hello World! 😉
Until a couple of decades ago, very few Indians owned cars. I’m old enough to remember the era when you had to book an Ambassador or Maruti and wait for years to receive it, because manufacturing capacity was forcibly limited by India’s inane industrial licensing regime. That’s all changed now, of course, and many Indian households have bought their first cars ever over the past couple of decades, paying somewhere between INR 5L and INR 20L.
I remember, as an Indian returned from overseas, being fascinated by how much time and energy many households put into researching which make and model to buy, comparing prices at different dealerships, and timing their purchases to try and get higher discounts.
All that trouble for a savings of maybe INR 1L, if they were lucky. Indians want value for money, and are prepared to invest time and trouble to get it. And they’re quite right!
But Indian entrepreneurs and professionals aren’t getting value for money when it comes to their tax bills at all!
And, although it upsets many of them, most of them have just accepted high Indian taxes, painful foreign exchange controls, endless unnecessary paperwork and bureaucracy, and harassment from corrupt government officials, as the price of doing business.
Every year, the paperwork seems to increase, despite so-called “reforms.” Five years ago, you didn’t have to bury yourself in endless GST paperwork. Now, the odds are you do. Ten years ago, you didn’t have to deal with cesses and surcharges on your income tax. Now, the odds are you do. Three years ago, you didn’t have to pay taxes on the dividends you received. Now, the odds are you do.
If you’re an Indian entrepreneur or professional, and your annual income is, say, INR 1.2 Cr, you are probably paying at least 44L in taxes.
Why not devote some time and energy to lowering that expense?
Let me put things into perspective. Over the next 25 years, you will shell out 11 Cr in tax. And that’s assuming new taxes, or cesses, or surcharges, are not imposed; but, given the Government of India’s fiscal deficits, they probably will be.
You devote so much time and energy to trying to grow your business, get new customers, cut unnecessary costs, increase profits. But somehow you don’t factor in what is probably your biggest cost of all: Taxes.
India is one of the most entrepreneurial countries in the world, in spite of its terrible bureaucracy, parasitic political class,unnecessary regulations, and massive underinvestment in infrastructure and education. But it also has hundreds of millions of unfortunate people who live at, below or just above subsistence level, producing almost no economic value and absorbing most government attention and resources.
India has a population of 1.383 billion people. But only 57.8 million people filed tax returns for their FY19 income. Even from that 57.8 million, 10.3 million showed income below the taxable threshold of INR 2.5L, and 32.9 million had taxable income between 2.5L and 5L, and were effectively exempt from tax under Finance Act 2019. Of the remaining filers, around 10 million individuals disclosed income between INR 5L and INR 10L, paying only token amounts (less than 1,000 USD each) in taxes.
Take a minute to let the implications sink in fully.
Out of a population of 1.383 billion, only 8,600 people disclosed incomes in excess of INR 1 Cr, and only 316,000 people disclosed incomes in excess of INR 50 L! These were literally the only people in India paying significant amounts in tax, both in absolute terms and as a percentage of their income. Everyone else was either paying nothing at all, or paying relatively insignificant amounts.
The result: You, and people like you, pay high taxes and get almost nothing in return. Too many people have been free-riding on you, the entrepreneurial and professional classes, for too long.
For a long time, in the 1970s and 1980s, you had no choice. Draconian foreign exchange restrictions made it almost impossible for a resident Indian to build a global business. There was no internet you could harness to market yourself to potential customers overseas, no email for instant, free communication with potential customers overseas. There were no private or foreign banks in India, and no credit cards you could use to make payments for overseas goods and services quickly and easily. Like in most areas, India’s inane bureaucracy ensured that internet adoption in India happened much later than in many other countries, giving Indians a latecomer disadvantage.
But things have changed. And it’s time your thinking changed as well. It’s time to think globally, to become one of us: Founders Without Borders.
The digital revolution and the offshore revolution mean that, withPrudentia’s signature Founders Without Borders service, you can operate in the cloud where borders do not exist, take yourself and your business offshore, and, in the right circumstances and with the right planning, legally pay no taxes in India at all, while enjoying all the lifestyle benefits of being an NRI or, with a foreign passport, an OCI.
GO WHERE THEY DESERVE YOU® Get in touch with us on email at firstname.lastname@example.org, or DM us on Twitter @founders_india to learn more!