According to a report by Morgan Stanley, almost 23,000 Indian millionaires have given up their citizenship since 2014. About 7,000 of them left the country in 2017 alone. In order to gauge the impact of this on the economy, the Central Board of Direct Taxes set up a five-member committee to learn about the exit of high net worth individuals from the Indian tax bracket. There has been a trend amongst wealthy Indians to migrate to other countries. Such activity is a tax risk since they could treat themselves as non-residents for the purpose of taxation even though they may have strong economic ties in the country.
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The latest addition to the bandwagon is real estate tycoon Surendra Hiranandani, co-founder of the Hiranandani Group. He gave up his Indian passport to become a citizen of Cyprus. He stated that the primary reason is difficulty in getting work visas on an Indian passport. Taxation was the last thing on his mind when he took the decision. He along with his elder brother Niranjan turned their company into one of the largest real estate companies and has joined the list of Indian dollar millionaires whose worth is at least INR 6.5 crores. Hiranandani is among the richest 100 Indians with a net worth of $1.29 billion. Cyprus ranks at 53 in the World Bank’s ‘Ease of Doing Business’ index, while India ranks at 100.
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The business tycoon also mentioned that the state of construction business is not upto the mark and the profit margins are not more than 10% while the developers are forced to borrow money at 12% annual interest. There is also difficulty in getting permissions for the real estate sector and there is the major problem of the rate of interest that the builders are charged. The World Bank ranks India 181st amongst 189 countries in terms of ease of doing business in the construction industry.