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India Tax and Estate Planning Structures

Geneva November 22, 2010. India Tax and Estate Planning Structures. Ravi NATH Partner, RNC legal t: + 91 11 4122 5000 f: + 91 11 4122 5001 c: + 91 98110 27193 e: ravi.nath@rnclegal.com. Succession basics : - Intestate - Testamentary

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India Tax and Estate Planning Structures

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  1. Geneva November 22, 2010 India Tax and Estate Planning Structures Ravi NATH Partner, RNC legal t: + 91 11 4122 5000 f: + 91 11 4122 5001 c: + 91 98110 27193 e: ravi.nath@rnclegal.com

  2. Succession basics: - Intestate - Testamentary Personal laws of Hindus/ Muslims/ Christians Concepts of: - Self acquired assets; and - Hindu Undivided Family HUF RAVI.NATH@ RNCLEGAL.COM

  3. Testamentary Succession • • Wills: making of • Execution of/expense on • Practical matters/tips • Life Estates and Rule against perpetuity • What can be willed • HUF as a legatee • Deity as a legatee • Charity RAVI.NATH@ RNCLEGAL.COM

  4. 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 RAVI.NATH@ RNCLEGAL.COM

  5. 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 RAVI.NATH@ RNCLEGAL.COM

  6. Wills vs. Trusts: comparison • Wills: • Legal process - probate • Assets - available to public gaze • - control on, pending probate • Susceptible to misuse • Trusts: • No need for probate • Family privacy maintained • Administration procedures minimised • Can meet individual family needs • Separation of economic rights from decision making RAVI.NATH@ RNCLEGAL.COM

  7. Taxation • Inheritance Tax/Estate Duty – Nil • Gift Tax – Nil without limit if received: • - from relatives such as spouse, lineal • ascendants or descendants • - on marriage • - under a will or by way of inheritance • Wealth Tax - 1% • Exemptions: first US$ 600 k • - One House, overseas assets and other • defined assets RAVI.NATH@ RNCLEGAL.COM

  8. Trusts, Taxation of • Non-discretionary • Profits of business/profession – taxed at max. marginal • rate (30% + 10% surcharge + 3% education cess on • income tax and surcharge = 33.99%) • If not – added to beneficiaries’ other income; slab rate • applies (10%, 20%, 30% + surcharge + educationcess) • Testamentary trust for benefit of dependent relative • (only one trust)- income will be added to beneficiaries’ • other income. Max. rate will not apply RAVI.NATH@ RNCLEGAL.COM

  9. Discretionary • Profits of business/profession – taxed at max. • marginal rate • Testamentary trust (only one trust) – taxed as an AOP • Oral trusts – max. rate applies RAVI.NATH@ RNCLEGAL.COM

  10. Q & A Ravi NATH RNClegal / Rajinder Narain & Co. International Commercial & Corporate Lawyers t: + 91 11 4122 5000 c: + 91 98110 27193 e: ravi.nath@rnclegal.com www.rnclegal.com

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