Guide · Direct tax

Tax strategy and wealth optimisation guide

Planning notes for high-net-worth individuals, business owners and family offices: reinvesting capital gains, choosing between the old and new regimes, splitting family income and managing residency when you live or invest abroad.

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Which law applies. This guide uses section numbers from the Income-tax Act, 1961. The Income-tax Act, 2025 applies from 1 April 2026 (tax year 2026-27) and renumbers sections, while returns for FY 2025-26 and earlier remain under the 1961 Act. Please confirm the current provision with us before acting on any point below.

Context

Budget 2025 and the direction of policy

The direction of policy is a continued push towards the new tax regime under section 115BAC, with capital gains holding periods likely to be rationalised further. For high-net-worth individuals the practical consequence is that a change of regime, or the timing of a large disposal, needs a multi-year cash-flow simulation: a decision that looks right for one year can forfeit high-value exemptions in the next.

Section 1

Capital gains planning

The ₹10 crore cap on reinvestment relief under sections 54 and 54F changed the arithmetic for large disposals. Gains above the cap are better spread across more than one statutory instrument than concentrated in a single new property.

Section 54EC bonds

Up to ₹50 lakh of gains can be invested in REC, PFC or NHAI bonds within 6 months of the transfer. The coupon is fixed, but the tax saved raises the effective internal rate of return (IRR) on the money considerably.

Indexation and timing

For unlisted equity and real estate, the date of sale decides which Cost Inflation Index (CII) year applies. On a multi-crore transaction, closing a day earlier or later can change the tax outcome materially.

Section 2

New regime, or the old regime with deductions

For individuals with annual income above ₹5 crore, the effective surcharge rate is the deciding variable. We work out the break-even deduction point: the level of deductions at which the old regime still produces a lower liability than the new regime once surcharge is taken into account.

Family income splitting. A Hindu Undivided Family (HUF) is a separate taxable person. Routing secondary investment income through an HUF gives the family a further basic exemption limit and access to the lower slabs.

Section 3

Global mobility and international tax

For NRIs and Indians with interests abroad, the 120-day and 182-day residency tests decide whether worldwide income becomes taxable in India. Days of presence need to be tracked through the year, so that a long visit does not inadvertently make a non-resident resident or disturb Resident but Not Ordinarily Resident (RNOR) status.

Double taxation avoidance (DTAA): using treaty rates to reduce withholding tax on dividend and royalty income from overseas jurisdictions.
FEMA compliance: planning remittances under the Liberalised Remittance Scheme (LRS) so that the limits are used well for foreign education or an overseas property purchase.

Disclaimer. This guide is for general information and does not constitute legal or tax advice. Please take advice on your own facts before acting on it.

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