Portfolio Management Services

For High-Net-Worth Individuals (HNIs), financial strategy is not just about making money. It is also about keeping up with India’s changing tax and compliance rules. As wealth grows, so does complexity. Broad portfolios require strategic tax and governance planning to protect long-term wealth momentum.

India’s HNI population is rising rapidly. With it comes scrutiny from regulators and the need for sharper, compliant, and tax-efficient wealth structuring. In this guide, we break down the core tax and compliance obligations every high net individual must stay on top of this, so your wealth remains in motion, not entangled.

Understanding the Indian HNI Taxation Landscape

India’s tax regime places HNIs under higher scrutiny, with elevated surcharge brackets and strict disclosure rules. A structured tax strategy is essential, not optional.

Income Tax Slabs for HNIs (FY 2025–26)

For individuals with annual income above ₹2 crore:

1. ₹2–5 crore: ~35.88% tax (incl. surcharge & cess)
2. ₹5–10 crore: ~39%
3. Above ₹10 crore: ~42.744%

The impact of these surcharges is significant, as even a marginal increase in income can push the entire slab upward, affecting take-home wealth and liquidity.

Capital Gains & Investment Taxation: What HNIs Must Track

HNIs typically diversify across direct equity, PMS, mutual funds, debt, AIFs, and even unlisted assets, each taxed differently.

Listed Equities (Stocks/Mutual Funds):

1. STCG (≤ 12 months): 20%
2. LTCG (> 12 months): 12.5% on gains exceeding ₹1.25 lakh

Unlisted Shares:

1. LTCG (>24 months): 12.5% without indexation for transfers on/after 23 Jul 2024; earlier transfers continue under 20% with indexation.
2. Additional surcharge is not specifically different for unlisted shares. It falls under the broader tax regime where the standard surcharge (if any) and cess applicable per the taxpayer’s income slab apply, but there is no unique surcharge clause for unlisted shares.

Debt Funds (as per new taxation rules):

1. Gains taxed as per income slab (post-April 2023 changes), without indexation benefits.

AIFs / PMS / Alternative Assets:

1. Category I & II AIFs enjoy pass-through status under Section 115UB and Section 10(23FBA). Non-business income such as capital gains, interest, and dividends is taxed in the hands of investors, retaining its original character. However, as per the Budget FY 2025–26 clarification, with effect from April 1, 2026 (FY 2026–27), gains from Category I & II AIFs will be explicitly treated as capital gains and taxed at 12.5%, rather than being classified as business income.
2. Category III AIFs are taxed at the fund level. Interest, dividends, and F&O income are taxed at the Maximum Marginal Rate (MMR), currently 42.74% including surcharge and cess. However, STCG is taxed at 20% and LTCG at 12.5% at the fund level itself. Investors receive post-tax returns and are not liable to pay tax again on such income.
3. PMS returns are taxed in the hands of investors as per the underlying asset class, similar to the pass-through treatment for Category I & II AIFs. The character of income, whether capital gains, interest, or dividends, remains the same as if the investor had invested directly.

Taxation isn’t uniform. A tax-aware portfolio structure is key to optimizing post-tax returns — especially for HNI clients with layered investments.

Types of High Net Worth and Their Tax Complexity

While the term HNI is often used broadly, there are actually different types of high-net-worth individuals, each facing unique tax planning and compliance needs:

1. Mass Affluent: Individuals with ₹50 lakh to ₹1 crore in investable assets. Typically engage with mutual funds and basic PMS.
2. HNWIs (High Net Worth Individuals): Net worth between ₹2 crore to ₹25 crore. This group actively participates in PMS, AIFs, direct equity, and global assets.
3. UHNWIs (Ultra-High Net Worth Individuals): Net worth exceeding ₹25 crore. They require bespoke structures like family offices, trusts, and international tax planning.

Understanding which category, you fall into is the first step in building a strategy that aligns with your tax obligations, global asset footprint, and risk appetite.

Common Compliance Challenges for HNIs

1. Schedule FA – Global Asset Reporting

If you're a resident Indian with overseas assets such as shares, property, bank accounts, or trusts, full disclosure under Schedule FA in your ITR is mandatory. The Black Money Act enforces heavy penalties for non-compliance.

2. Gift Taxation

Gifts above ₹50,000 from non-relatives are taxable under “Income from Other Sources.” Property or shares gifted below market value may also trigger tax based on fair valuation.

3. Ownership in Multiple Businesses

GST filings, inter-company loans, and director positions in multiple entities bring compliance complexities, especially if you're drawing salary/dividends across companies.

4. TDS and Advance Tax Obligations

HNIs earning from rent, interest, dividends, and capital gains often fall short of their quarterly advance tax commitments, leading to penal interest. TDS reconciliation is another blind spot if income is fragmented.

Strategic Tax Planning for High-Net-Worth Individuals

1. Leverage Structures: HUFs, Trusts, LLPs

HNIs can use Hindu Undivided Families (HUFs), private trusts, or LLPs to split income and reduce effective tax burden. These structures also aid succession planning.

2. Stagger Gains Across Years

Instead of booking all profits in one financial year, plan exits across years to stay below surcharge thresholds. This applies to equity, unlisted shares, and ESOP redemptions.

3. Maximize Deductions

Don't overlook:

• 80C (₹1.5 lakh)
• 80D (health insurance)
• Section 24(b) (home loan interest)

Note: All the above deductions are disallowed if the taxpayer opts for the new tax regime.

• Capital loss harvesting to offset gains

Example:

Sold Reliance after 14 months → ₹4,00,000 LTCG → Tax = ₹50,000 (12.5%).

Sold Infosys after 10 months → ₹2,00,000 STCL.

Without harvesting: Tax = ₹50,000.

With harvesting: Offset loss → Net LTCG = ₹2,00,000 → Tax = ₹25,000.

These small tweaks can reduce taxable income significantly.

4. Plan Foreign Remittances Under LRS

Under the Liberalized Remittance Scheme (LRS), residents can remit up to USD 250,000 per financial year abroad.

• FY 2025–26 update: No TCS up to ₹10 lakh remittance.
• Above ₹10 lakh, 20% TCS applies on most foreign investments and spends.
• Education funded via loan: Full TCS exemption.

Proper planning ensures liquidity isn’t blocked due to TCS outflows.

How FYERS Helps HNIs Stay Compliant and Tax-Efficient?

At FYERS, we know that for affluent investors, growth is just one part of the equation. Protecting and structuring that wealth is equally vital.

Our solutions for HNIs include:

1. Tax-aware PMS & mutual fund portfolios
2. Real-time capital gains and TDS reporting
3. Integrated views across AIFs, debt, equity, and offshore assets
4. Portfolio rebalancing based on tax triggers
5. Annual compliance checklists and reminders

We don’t just help you grow wealth, we help you grow it cleanly and clearly.

Conclusion

Taxation and compliance are not just technicalities; they’re strategic levers in the hands of serious investors. For India’s high net worth individuals, missed disclosures or inefficient portfolio structures can quietly erode long-term returns. For HNI in the stock market, tax strategy can be the difference between preserved momentum and lost compounding.

The solution? Stay structured. Stay proactive. And surround yourself with experts who not only understand the regulations but also align your financial decisions with them.

At FYERS, we bring credibility, control, and clarity to your wealth strategy. By managing risk, taxes, and compliance proactively, you drive your wealth toward lasting momentum.