india tax and estate planning structures ravi nath partner, rnc legal t: + 91 11 4122 5000 f: + 91...

India

Tax and Estate Planning Structures

Ravi NATH

Partner, RNC legal t: + 91 11 4122 5000 f: + 91 11 4122 5001c: + 91 98110 27193

e: [email protected]

Geneva

November 22, 2010

• Succession basics:

- Intestate - Testamentary

• Personal laws of Hindus/ Muslims/ Christians

• Concepts of: - Self acquired assets; and - Hindu Undivided Family

RAVI.NATH@ RNCLEGAL.COM

HUF

Testamentary SuccessionTestamentary Succession

• • Wills: making of Wills: making of • Execution of/expense onExecution of/expense on• Practical matters/tipsPractical matters/tips• Life Estates and Rule against perpetuityLife Estates and Rule against perpetuity• What can be willedWhat can be willed• HUF as a legateeHUF as a legatee• Deity as a legatee Deity as a legatee • CharityCharity


Trusts: types of

• Private – Indian Trusts Act, 1882

• Public – no national law, State laws only

• Discretionary/Non-discretionary

• Inter-vivos/Testamentary

• Revocable or Living Trusts as contrasted with Irrevocable Trusts


Trusts: usefulness and features

• During the Settlor’s lifetime, or by will – implications/features

• Transferor/Settlor/Trust property• Tax and Stamp Duty issues• Family circumstances• Beneficiaries• Rule against perpetuity• Letter of wishes • Trustees – professional/corporate/family/others - duties of • Protector/Administrator



Wills vs. Trusts: comparison Wills vs. Trusts: comparison

WillsWills::

• Legal process - probateLegal process - probate• Assets - available to public gaze Assets - available to public gaze - control on, pending probate- control on, pending probate• Susceptible to misuse Susceptible to misuse

TrustsTrusts::

• No need for probateNo need for probate

• Family privacy maintainedFamily privacy maintained

• Administration procedures minimisedAdministration procedures minimised

• Can meet individual family needs Can meet individual family needs • Separation of economic rights from decision makingSeparation of economic rights from decision making


Taxation Taxation

• Inheritance Tax/Estate Duty – NilInheritance Tax/Estate Duty – Nil

• Gift Tax – Nil without limit if received:Gift Tax – Nil without limit if received: - from relatives such as spouse, lineal - from relatives such as spouse, lineal ascendants or descendants ascendants or descendants - on marriage- on marriage - under a will or by way of inheritance- under a will or by way of inheritance • Wealth Tax - 1% Wealth Tax - 1% Exemptions: first US$ 600 k Exemptions: first US$ 600 k - One House, overseas assets and other - One House, overseas assets and other defined assetsdefined assets

Trusts, Taxation ofTrusts, Taxation of

Non-discretionaryNon-discretionary

• Profits of business/profession – taxed at max. marginal Profits of business/profession – taxed at max. marginal rate (30% + 10% surcharge + 3% education cess on rate (30% + 10% surcharge + 3% education cess on income tax and surcharge = 33.99%)income tax and surcharge = 33.99%)

• If not – added to beneficiaries’ other income; slab rate If not – added to beneficiaries’ other income; slab rate applies (10%, 20%, 30% + surcharge + educationapplies (10%, 20%, 30% + surcharge + education cess) cess) • Testamentary trust for benefit of dependent relative Testamentary trust for benefit of dependent relative (only one trust)- income will be added to beneficiaries’ (only one trust)- income will be added to beneficiaries’ other income. Max. rate will not applyother income. Max. rate will not apply



DiscretionaryDiscretionary

• Profits of business/profession – taxed at max. Profits of business/profession – taxed at max. marginal ratemarginal rate

• Testamentary trust (only one trust) – taxed as an AOP Testamentary trust (only one trust) – taxed as an AOP

Oral trustsOral trusts – max. rate applies – max. rate applies

Q & A

Ravi NATHRNClegal / Rajinder Narain & Co.

International Commercial & Corporate Lawyerst: + 91 11 4122 5000c: + 91 98110 27193

e: [email protected]

india tax and estate planning structures ravi nath partner, rnc legal t: + 91 11 4122 5000 f: + 91...

Documents