High-Net-Worth Individuals: A Guide for Indian Taxpayers
High-net-worth individuals (HNWIs) are defined as rich and wealthy members of society who have substantial financial reserves. In India, a person is deemed to have a high net worth if they have the means and capacity to invest at least Rs. 5 crores. CEOs, chairpersons, and CTOs of major firms are typically considered HNWIs. As such, a multitude of private banks, financial consultants, and companies provide customised services to meet the specific requirements of high-net-worth individuals (HNIs) and help them reach their financial objectives. In this article, you will explore more about high-net-worth persons, very high-net-worth folks, and ultra-high net-worth individuals, their types, and the investment and tax issues they encounter.
Table of Content
Who are the High Net Worth Individuals (HNWIs)?
An individual who invests in the Indian stock market and has a net worth over Rs. 5 crore is classified as a high net-worth individual (HNI). These people are usually entrepreneurs, corporate executives, and business proprietors. According to the Securities and Exchange Board of India (SEBI), investors who invest over Rs. 2 lakhs in an initial public offering (IPO) are considered as HNIs. There are other differences within this category. These include an HNI component which is reserved for investors bidding between Rs. 2 lakh and Rs. 10 lakhs, and a two-thirds reservation is booked for those who are putting an investment of above Rs. 10 lakhs.
The complexities of wealth management for such individuals is immense. So private wealth managers frequently place a high priority on dealing with HNIs. High-net-worth individuals need specialised assistance with tax planning, estate planning, and various other financial concerns. It is important to remember that different nations and financial institutions have different requirements for high-net-worth individuals.
Categories of High-Net-Worth Individuals
High-net-worth people are generally divided into three groups. Here is a brief overview of the three varieties.
Individual investors who have a net worth of up to ₹5 crores are considered to be high-net-worth individuals (HNIs).
Individual investors who have a net worth of between ₹5 crores and ₹25 crores are known as very high net worth individuals (VHNIs).
Individual investors who have a net worth over ₹25 crores are defined as ultra-high net worth individuals (UHNIs).
The Securities and Exchange Board of India (SEBI) divides non-institutional investors (NIIs) or HNIs into two categories for the purposes of initial public offerings. These two categories are:
Small NII: High net worth individuals who tend to out an investment anywhere from ₹2 lakhs to ₹10 lakhs are considered as small NII or SNII.
Big NII: Big NIIs, or BNIIs, are high-net-worth individuals who invest more than ₹10 lakhs.
Investment Alternatives for High-Net-Worth Individuals
HNI investors have chosen tailored investing choices in recent years. But HNIs can select the best investment opportunities from the following list based on their own needs and objectives:
Alternative Investment:
Among HNIs in India, alternative investing is becoming a common choice. There are a lot of causes behind this. HNIs can diversify their portfolio with assets that have a low correlation to conventional options like equities and bonds by choosing alternative investments like P2P lending, fractional real estate, and private equity. These investments can yield significant returns for individual investors as well. These funds are managed by knowledgeable and experienced fund managers who have a thorough awareness of the financial requirements of NHIs. You can have a consultation with a financial planner.
Scheme for Portfolio Management:
HNIs would do well to have a look at this investing possibility. Here, a minimum investment of Rs. 50 lakh is needed. HNI investors benefit greatly from the flexibility offered by PMS programs. They are able to customise the plan to fit their needs. People can choose to invest in a specific industry or area, for example, and select a fund manager to help them with it. Investors must choose their investments appropriately while also being conscious of the increased dangers connected to these funds.
Market Linked Debentures (MLDs):
Market Linked Debentures typically track benchmark indices like the G Sec rates, equities index, gold index, etc. Investors are exposed to a range of market areas while mitigating the risks associated with direct asset exposure. HNIs may select this investment option, particularly in erratic markets or when investors anticipate erratic markets in the near future.
Commercial Real Estate and Real Estate Funds:
HNIs frequently make real estate investments to diversify their portfolios. HNIs have more investment options besides buying real estate directly. They can participate in several projects through REITs (Real Investment Trusts). They can also invest in commercial real estate through numerous alternative funds. Property that is used for business purposes has the potential to yield larger returns than housing. Retail stores and warehouses are included in the definition of commercial real estate, along with office spaces. HNIs who are interested can also purchase serviced or co-living apartments.
Angel Investing/Unlisted Equity:
High Net Worth Individuals (HNIs) may also think about making start-up company investments, popularly known as angel investing. To properly manage high risks, it would be even better if HNIs could spread their angel investments among 8–10 different enterprises. Some entrepreneurs can also receive assistance from HNIs in the form of contacts and input.
Benefits for High-Net-Worth Individuals
High-net-worth individuals receive no special advantages over ordinary investors in the context of the Indian stock market. Non-Institutional investors, which include HNIs, are often allocated a part of a company's overall issue size when it comes to public offerings. A third of the area set aside for NIIs is devoted to SNIIs, and the remaining two-thirds are devoted to BNIIs. High net-worth individuals also benefit from specific financial goods such as algo trading tools, dedicated banking services, and exclusive and tailored financial services such as Portfolio Management Services (PMS).
Challenges Encountered by High-Net-Worth Individuals
HNIs have access to various types of investing opportunities. However, they confront a number of threats and difficulties. A summary of the main difficulties HNIs encountered is as follows:
Market Risks: HNIs' sensitivity to price fluctuations and volatility is maintained when they invest in certain market-linked investment alternatives. Investing in high-risk choices such as hedge funds and structured products. These are more susceptible to market volatility, and thus expose investors to a significant chance of losses.
Liquidity Risk: Illiquid alternative investments like real estate and private equity provide specific difficulties when HNIs seek to swiftly access their cash.
Regulatory Risk: Wealthy people frequently make investments in unregulated goods. They are consequently exposed to fraud, poor management, and occasionally unethical behaviour.
Concentration Risk: Rich people who own a substantial amount of wealth tend to focus their investments on a single asset. They run some possible risks as a result of unforeseen circumstances.
Operational Risk: Theft and fraud are two operational hazards that HNIs are vulnerable to. Individual investors consequently suffer large financial losses as a result of this.
Complexity: It is challenging to appropriately measure risks and potential returns when there is complexity involved in the investing options made available to HNIs.
Taxes: HNIs must deal with a number of intricate tax issues pertaining to investments. This covers gift taxes, taxes on capital profits, and taxes on estate. HNIs should speak with financial experts and investment managers to receive advice on how to properly diversify their portfolios in order to mitigate all of these risks and difficulties.
Wealth Management Advice for High-Net-Worth Individuals
HNI investors have the ability to manage their assets to increase and protect their wealth in the following ways:
Wealth Allocation: HNIs can create customised wealth management plans by working with advisors or wealth managers. These methods include asset allocation, portfolio diversification, and investment avenues that are customised to the investor's financial objectives, risk tolerance, and time horizon.
Tax Guidance: HNIs can maximise profits and minimise tax obligations with the use of tax planning. A team of tax consultants and wealth managers can proactively plan investments and strategies to improve tax efficiency.
Estate Planning: Planning of estate is crucial for high-net-worth individuals. It helps them to enable hassle-free asset transfers as intended and to conserve wealth between generations. HNIs can avoid estate taxes and guarantee the financial security of their heirs by utilising estate planning techniques like trusts and wills.
Hazard Assessment: HNIs need to implement thorough risk management plans to safeguard their money against unanticipated circumstances and market fluctuations. HNIs can protect their financial well-being and hedge against particular risks by using insurance products including life, health, general, and business insurance in addition to portfolio diversification and hedging.
ITR Filing Advice for HNWIs
HNIs are required by law to file their ITRs and to disclose all of their assets and liabilities at the time of filing. HNIs pay taxes at a base rate of thirty percent. In addition, HNIs are prone to a surcharge on the basis of their total income. High-net-worth individuals can avoid taxes in a number of ways, though. For instance, high-net-worth individuals (HNIs) can establish LLPs with their family members to save taxes. This is because the profit distribution under an LLP structure is tax-free.
Conclusion
To sum up, a sizable share of the world economy is made up of high-net-worth individuals. They have a special financial situation and must deal with a variety of risks, possibilities, and obstacles. Making the most out of your investments as an HNI requires you to be able to navigate opportunities and problems. You can optimise your wealth and accomplish your intended goals with the help of an expert in financial planning.
FAQ
Q1. Who qualifies as a high-net-worth individual?
In India, high-net-worth individuals, or HNIs, are defined as investors with the capacity to make up to Rs. 5 crores in investments. HNIs are investors who make long-term investments with the goal of building wealth. HNIs include executives such as CTOs, CEOs, and owners of large corporations.
Q2. Who is a very high net-worth individual in India?
Those with an investable excess in liquid form between Rs. 5 crore and Rs. 25 crores are known to be very high net worth individuals.
Q3. Who is an ultra-high net-worth individual in India?
A considerable proportion of the world's wealth is controlled by ultra high net worth individuals, who are among the richest persons in the world. Although they are extremely rare, these individuals are highly powerful.
Q4. Which country has the maximum number of HNWIs?
The nations with the highest concentration of affluent citizens are the United States, Japan, China, and Germany, according to numerous surveys and publications. There are about 18 million HNWIs in the USA, making them the country with the largest number worldwide. There are about 4.4 million high-net-worth individuals in China, which comes at second position. On the other hand, there are roughly 3 million NHWIs in Japan and 1.5 million in Germany.
Q5. How many HNWIs are there in India?
During the 2020 fiscal year, nearly 278 thousand Indians were classified as high-net-worth persons (HNWI). HNWIs possess financial holdings valued at least $1 million USD. In 2025, this number is expected to raise by more than six hundred and eleven thousand.
Q6. What is India’s top 1% net worth?
An average of 54 million rupees ($873,000) is owned by the wealthiest 1% of India's 92 million adult population. The 10,000 wealthiest people in this category are worth an average of 22.6 billion rupees, which is 16,763 times more than the national average.
Q7. What is the tax rate for high-net-worth individuals?
Regular taxpayers pay lower tax rates than High Net Worth Individuals (HNWIs). More specifically, they pay an additional 10% in taxes if their taxable income exceeds ₹50 lakhs but stays below ₹1 crore. The surcharge increases to 15% if their taxable income is more than ₹1 crore.
Q8. How can I save my HNWI income tax?
High Net Worth Individuals (HNWIs) might choose to invest in fixed deposits (FDs), which are offered by banks and offer tax savings. These FDs offer tax advantages under Section 80C of the Income Tax Act and usually have a five-year lock-in term. They also have the Public Provident Fund (PPF), a long-term investing option with tax advantages, as an additional choice.
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