24-04-2025
DTAA Advantage: How NRIs in countries like UAE can invest tax-free in India, explains Prime Trigen Co-CEOs
As global trade dynamics shift and India strengthens its position as a preferred manufacturing hub, Non-Resident Indians (NRIs) are increasingly looking to tap into the country's growth story.
One of the key advantages working in their favor is the
Double Taxation Avoidance Agreement
(DTAA) that India has signed with several countries including the UAE, Singapore, and the Netherlands.
This agreement ensures that capital gains from mutual fund investments in India are not taxed twice—making India an even more attractive investment destination.
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For NRIs residing in zero capital gains tax jurisdictions like the UAE, this creates a powerful opportunity to grow their wealth tax-free.
Maneesh Kapoor and Sailesh Balachandra, Co-CEOs of
Prime Trigen Wealth Ltd.
, break down how NRIs can leverage this unique tax edge while aligning with India's long-term growth prospects. Edited Excerpts -
Q) Thanks for taking the time out. How might escalating trade tensions between major economies like the US and China affect the global investment landscape for NRIs?
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A) The current tariff war is making it difficult to gauge the direction of the dollar. Returns of NRI's who have been investing in US Stock Markets and Real Estate markets in USA will be affected due to slowdown in US Growth due to tariffs.
The US Companies who have been importing goods from China would not be able to source them cheaply. This will affect the profitability of such companies which will impact their stock price.
On the other hand, NRI's investing in India will have a tough time as if Dollar weakens, then it takes a terrific hit on the returns of NRI Investors.
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Q) In the wake of a tariff war, should NRIs consider reallocating part of their portfolio from global equities to safer fixed-income instruments or gold?
A) Definitely. In such times, diversification is the perfect shield for any investor. NRI investors should increase their allocation towards gold and silver as we have seen many central governments also increase their exposure to gold and decrease their exposure to US Treasury Papers.
For Fixed income they should stick to companies which have comfortable Debt/Equity ratio's as in these times sticking to companies with sufficient liquidity is very important.
Sovereign Bonds would be less lucrative but safest in the portfolio. Also, one should consider Market Neutral Funds in their portfolio as their correlation with markets is zero.
Q) What kind of geographical diversification strategies should NRIs adopt to hedge against the volatility caused by trade wars?
A) NRI's should have a diversification at asset class level as well as geographical level. At asset class level, they should have Debt, Commodities and Real Estate apart from Equities in their portfolio. The importance of Market Neutral Products could not be emphasized more at such times.
Market Neutral Products such Agricultural REIT's, Life Settlement Funds etc are good products to have in a portfolio. For Geographical diversification, one should reduce exposure to US equities and increase India exposure.
The overall exposure to equities should reduce to 50%, 30% to debt, 10% to commodities and Real Estate and 10% to Market Neutral Funds as our suggestion.
Q) Could India benefit as a manufacturing alternative amid
US-China trade tensions
, and how can NRIs capitalize on this shift?
A) Yes, India is definitely a beneficiary of this war as many global manufacturing companies would prefer an alternative to China amid the rising tension between US and China.
Also, before tariff, even during Covid times the world had realized the importance of supplier diversification due to complete lockdown in China.
NRI's can take advantage of this situation by investing in Mutual Funds in India, tilted towards large cap.
India has a Double Taxation Avoidance Agreement (DTAA) signed with counties such as UAE, Singapore and Netherlands, to name a few, due to which capital gains on sale of MF Units will not be taxed in India and it will be taxed in their country of residence.
Countries such as UAE does not have capital gains which means the NRI can literally pay no tax on their gains in any of the countries.
Q) What role do international investment opportunities play in the portfolios of Indian HNIs, and how are wealth managers facilitating access to these markets?
A) Indian HNI's are looking for diversification outside India for many reasons. Most of them would like to build a corpus outside India for their next generation or for dual citizenship. or just as a safety pot. Most of the HNI's prefer investing outside India either through the Gift City Route or through LRS.
Wealth Managers have been guiding a lot of families to invest through LRS route by investing through platforms such as Kristal.
These apps allow the investors to invest in funds of different geographies such as Japan, Europe, USA and Other Asian economies. They also allow investors to invest in complex products such as Fixed Coupon Notes (FCN's).
