In a recent interview on the popular YouTube channel Finance With Sharan, investor Paritosh Mukhija explained his decision to park the majority of his wealth outside India. Hosted by financial educator Sharan Hegde, the discussion—titled “Why This Investor Doesn’t Keep His Money in India | Currency, Taxes & More”—highlighted structural challenges that make domestic investments less appealing for long-term wealth preservation, especially for high-net-worth individuals.
Mukhija’s rationale centers on three primary concerns: the persistent depreciation of the Indian Rupee, unfavorable tax regimes, and limited opportunities for true global diversification.
The Eroding Value of the Rupee
One of the most compelling arguments Mukhija raises is the historical depreciation of the Indian Rupee against stronger currencies like the US Dollar. Over the long term, the Rupee has weakened at an average annual rate of around 3-5%, driven by factors such as inflation differentials, trade deficits, and capital flows.
For instance, since economic liberalization in 1991, the Rupee has depreciated at a compound annual rate of approximately 3.7-4.5% against the USD. This means that even if an investment in India delivers nominal returns, a significant portion is eroded when measured in global purchasing power. For investors with international lifestyles, education expenses for children abroad, or aspirations for global mobility, holding wealth primarily in Rupee-denominated assets effectively reduces real wealth over time.
By contrast, investing in USD-based assets—such as US stocks or funds—helps hedge against this currency risk, preserving and potentially enhancing purchasing power worldwide.
Tax Inefficiencies and Compliance Burden
India’s tax structure adds another layer of disadvantage for domestic investments. Capital gains taxes, dividend distribution taxes, and stringent reporting requirements for foreign assets create friction.
- Long-term capital gains (LTCG) on equity investments are taxed at 12.5% (as updated in recent budgets), while short-term gains are taxed at slab rates.
- Dividends are fully taxable in the hands of recipients.
- High-net-worth individuals face additional scrutiny, including mandatory repatriation rules and disclosures under the Black Money Act for overseas assets.
In comparison, many international jurisdictions offer more favorable tax treatments through treaties, lower effective rates on dividends and gains, or deferred taxation structures. Mukhija points out that setting up family offices or investing abroad allows for optimized tax planning without the same level of complexity or penalties for non-compliance.
Broader Structural Issues and Global Opportunities
Beyond currency and taxes, Mukhija highlights limited diversification within Indian markets, which are heavily concentrated in certain sectors, and occasional regulatory uncertainties. Global markets, particularly US tech giants, have historically delivered superior compounded returns with lower volatility in hard currency terms.
This perspective reflects a growing trend among affluent Indians: earning income in India’s high-growth economy while safeguarding and growing wealth internationally. Influencers like Akshat Shrivastava have echoed similar views, advocating for balanced portfolios that include significant overseas exposure.
A Balanced Approach for Indian Investors
While Mukhija’s strategy suits those with substantial wealth and global outlook, it underscores the importance of diversification for all investors. Indian residents can access foreign stocks through Liberalised Remittance Scheme (LRS) limits (up to $250,000 per year) or via mutual funds and ETFs.
Ultimately, Mukhija’s insights serve as a reminder that wealth preservation requires looking beyond borders. As India continues to grow, addressing currency stability and tax competitiveness could encourage more domestic retention of capital—but for now, many savvy investors are voting with their portfolios.
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