All things Money Thread

Akash Deep

Active Member
At same time ONGC is working hard to find new Gas sources in India itself. But Greedy Reliance brorhers too are playing dirty games in same sector to undermine ONGCs efforts.
Sir, The only reason that our country is still so poor is our thought process that private sector will destroy the country and only Govt. organizations are the best option for development. No body is stopping ONGC or any other organization to find new oil and gas reserves and start drilling but then they need to be competitive. I don't find any problem if all the drilling contracts are given to Reliance till the time they are ready to offer the work on lesser price. In fact private companies are a blessing for our nation today. The have brought competition for these Govt organizations and has the changed the work culture of the Babu's sitting for years and waiting for retirement. I can give 100 examples for incompetency of GOVT organizations. Biggest one are DRDO and Air India.

Only Govt. organization that deserves respect is ISRO.
 

Big Daddy

Super User
Where to retire? India, Nepal, Sri Lanka or Bhutan? It is important for Indians because if your income exceeds :r: 10 lakh then selecting a place is important because tax savings could be huge. At first, India is the worst place to retire because its top tax rate is 30%. Nepal's top tax rate is 25%. So you could save on your taxes if you go to Nepal. As an Indian, you are allowed to live there and you can visit India without visa. Cost of living in Nepal is cheaper too.

Indian residency laws are some of the strictest. I was thinking that you could live in a place like Darjeeling and spend a few days in Nepal, a few days in India and a few days in Bhutan so that you are residence of neither countries and do not pay any tax in any country. Unfortunately, that is not going to work because Bhutan is by far the worst country for foreigners. Bhutan is a Kingdom and it will not let you live there. Even visa to Bhutan requires travel schedule and is only approved for the length of your travel schedule.

The way Indian residence works is that you cannot stay in India for more than 85 days per year. Technically, Indian residence is defined as anyone who stays for over 183 days per year but actual rules are slightly more complicated as they also look at number of days you stayed in India in last five years. The 85 days per year or less meets all the criteria and is a safe bet.

Sri Lanka is by far the best country in terms of tax simplicity. Sri Lanka does not tax foreign income. It only taxes sources of income earned in Sri Lanka. This means that if you live in Sri Lanka, you pay no tax on your Indian income. Sri Lanka asks certain level of wealth before it will let you stay in the country. So you need to have a minimum level of wealth before you can retire in Sri Lanka but you will save substantially in having to pay for taxes. Higher the wealth, less attractive India is to retire because its tax rate is the highest.
 

Big Daddy

Super User
I only looked at countries around India. Mauritius has a flat tax rate of 15% and it will tax your foreign sources of income if you live in Mauritius. So it is not all that attractive. The cost of living will also be high there. I also found that crime rate (theft) is fairly high there.

If you fall in high tax bracket (30%) then living in Sri Lanka (SL) will save you all of it. There are some initial setup costs but Sri Lanka offers resident visa to reside there (http://adventuresinatuktuk.blogspot.com/2015/03/sri-lanka-as-viable-retirement-haven_29.html). SL will not tax foreign income and India does not tax income for non residents. So you can move to SL for retirement as long as your cost of living does not increase by 30%. Furthermore, you can always live in India for about 80 days every year. The flight time, time zone, etc. is all convenient.

If Nepal changes rules like SL then that is even better because you do not need visa to live and travel to and from Nepal and it is well connected to India by road. Also, the weather is slightly better in Nepal. The only problem is that it imposes 24% tax on all income (including Indian retirement income). Residency in Nepal is determined as 180 or more days.

As taxes increase in India, over time, Indians will almost have to start figuring out savings in retirement.
 

citymonk

Super User
Self Employed in India are in very difficult situations, including retirement planning.
They have to rely on Government Fixed Deposits or Public Provident Fund. Government is reducing interest rates day by day, now it is 6.5 percent on FDs and 7.9 percent on PPFcounts.

Big Daddy, I ask your suggestions how to save for pension in India.

Pension Funds hardly offer better interest then Fds and PPF currently plus they are not secured like PPF.

Self employed mostly depend on rental Income for pension, if by luck they own rentable properties.

BTW, Is income from rent or sedentary business or share dividends considered pension income in Lanka.
 
Last edited:

Big Daddy

Super User
Lanka is not going to tax your foreign sources of income. This is the primary benefit. However, for things you are mentioning, Indians could even when you live in Lanka. For example, I think Indian dividend income is taxed at source and remaining is considered "tax free." I am not sure about how rent and other businesses income would work as far as Indian taxation is concerned. Lanka is only good if you make good retirement income because one of the criteria for Lanka granting you residency visa is about :r: 1 lakh/month retirement income. Anything less and you may not be granted resident visa. Lanka wants to make sure that you have enough money to live in Lanka.

For retirement, there is an investment thread that contains some ideas. However, a simple way to approach retirement is divide your money into two buckets. First bucket is meant for satisfying necessities (day to day costs), and other for discretionary income (luxuries). Generate your necessities income from fixed deposits (predictable income) and your discretionary income from your investments (portfolios). Say your necessities amount to :r: 50,000/month then annually you need :r; 600,000. If your FD is giving you 6.5% then divide :r: 600,000 by 6.5% and you get about :r: 93 lakhs that you need to put in FD. If you have any more money left then put it in investment portfolio consisting of stocks and bonds. This investment portfolio would not only generate extra money to fund your other wants and emergency cash needs, but also help you keep up with inflation.

I am personally against real estate. If you have real estate, sell it and put that money towards your first bucket predictable income assets. Rental income cannot be predictable because people many not pay rents. Relatives may give you excuses to use your rental estate. Children (or their wives) may ask you to move property under their names etc. Real estate is a visible asset and is often source of envy. It is also non movable asset and you are stuck to a location.
 
Last edited:

Akash Deep

Active Member
I think that the only aspect we are considering here is Tax rate. But the question is, Is it the only think that a person will consider post retirement? The countries we are talking here are not politically stable. Living in Nepal of Sri Lanka is not an easy task. I guess security and other things equally matters. And why are we so worried about the tax rate here? I am sure you have to pay 30% only if you fall under the highest tax slab and I am pretty sure no one will have a problem in paying taxes if their income is around 10lac. I am considering that the person is Gonna show some Investments to save taxes. Apart from this I guess the senior citizens get more tax benefits than others.

A small calculation here:-

0% Tax - 3lac
5% Tax - 3-5Lac
20% Tax - 5-10lac
30% tax - above 10lacs

what we need to consider here is that even if we show an investment of just 2 lac which is very much possible than we have to pay only 1.10lac rupees as taxes on an income of 12lac per annum. how much is it? just 10% of your income.

Highest tax rate in Lanka is 24% but the cost of living is also way higher than India.
 

Big Daddy

Super User
The highest tax rate in Lanka is 24% on income earned in Lanka only. For foreign sources of income you pay no tax. This is not true for India. India will tax your foreign sources of income, which makes it less desirable place to retire for foreigners. Same thing with Nepal as well except their top tax rate is 25%. Furthermore, India is hardly a safe country. It appears safe because you live there and know how to avoid trouble. If you live in Lanka on Indian pension, you may get direct saving of nearly 30%. Keep in mind that you will not be able to get Lanka visa if you fall in less than maximum tax rate category. Lanka wants you to be somewhat rich coming in. As long as your cost of living does not increase by 30%, which I doubt that it will, Lanka is not bad option to consider. You may also live in India for about 2.5 months every year. So, it is not a bad deal. It gets attractive when your retirement income is very high. Rich retirees should get out of India because India penalizes (robs) them.
 

Akash Deep

Active Member
I still don't understand the logic here. If you keep your savings in India then you will have to pay the taxes on it if you are earning from those savings. for example Property rent, FD etc. If you move those savings to Sri lanka then also you will have to pay the taxes on the income you have from those savings. So what is the logic? This is what the rule is in Srilanka:-

For the purposes of taxation, how is an individual defined as a resident of Sri Lanka?

A resident is a person who is physically present in Sri Lanka for 183 days or more during a year of assessment.

If you say that every 5 month the person can come back to India for a while and than he can go back to Lanka then I guess it is kind of a cheating as you are stealing the Srilankan Govt. Money in a way. If you stay their your whole life then you pay the taxes on the money you make from your savings.

This means that if you stay in Sri lanka for 6 month than you are a resident and you need to pay taxes. In both the cases be it India or Srilanka, you only pay taxes on what you earn on your saving. By this logic, Sri Lanka is more expensive for me as the cost of living in Srilanka is more than India.

The logic here that we are not paying the taxes on savings in India, We are paying the taxes on the money we are making on those savings. Govt can't tax your on the money for which you have already paid the taxes.

For the Riches it does not even matter as they make hell lot of money on their savings hence their savings remain intact and they enjoy their life on the money they make via, FD, Pension Schemes, Mutual Funds etc where they have invested those savings.
 
Last edited:

Big Daddy

Super User
You are still not getting it. Sri Lanka residency matters only if you have sources of income in SL. SL does not tax foreign sources of income. This means that if you are resident of SL and your income is generated outside SL then it will not be taxed in SL. So, if your source of income is Indian pension then SL will not tax it. As far as India is concerned, its tax policy is too complex and too restrictive. One thing I know is that it does not tax NRIs based on their Indian citizenship, and it will tax all sources of income (foreign or domestic) if you are resident. If you draw a pension and live in SL then you may not be taxed. As mentioned before, dividends will be taxed in India.

The whole issue is just a point that there may be advantages for some rich in India to consider alternatives. For some, it may be a good idea and for others it may not be a good idea.
 
Top