Who are known as High Net Worth Individuals (HNIs)
High-net-worth individuals (HNIs) are rich members of society who have significant financial resources.
High Net worth Individuals (HNIs) are those who are working in position like CEOs, chairpersons, and CTOs of large corporations.
When individuals will be called as a High Net Worth Individuals (HNIs)
An individuals will fall in category as a High Net Worth Individuals (HNIs) depending on total net worth which are divided into three types :
- High Net Worth Individuals (HNWIs): Individuals holding with liquid assets up to Rs. 5 crore are known as High Net Worth Individuals.
- Very High Net Worth Individuals (VHNWIs): Individuals who holds a net worth ranging from Rs. 5 crore to Rs. 25 crore are known as Very High Net Worth Individuals
- Ultra High Net Worth Individuals (UHNWIs): When an individual investors holds a net worth exceeding Rs. 25 crores are known as Ultra High Net Worth Individuals.
High Net Worth Individual (HNI) definition as per the Indian stock market and SEBI
As per the Indian stock market, individual who holds a net worth exceeding Rs. 5 crore are falls under high-net-worth individuals in India.
As per the Securities and Exchange Board of India (SEBI), investors who invest more than Rs. 2 lakh in a public IPO are falls under high-net-worth individuals.
There also have subcategory based on investment amounts like investors bidding between Rs. 2 lakh and Rs. 10 lakh with one-third reservation of the HNI portion, those investing above Rs. 10 lakh, and have two-thirds reservation of the HNI portion are the large High Net Worth Individuals (HNIs).
Also, The SEBI has categorized High Net Worth Individuals (HNIs) into two categories based on their investment amount who are investing in Initial Public Offerings (IPOs) :
| Small NII | Big NII |
| High net worth individuals investing between Rs. 2 lakh to Rs. 10 lakh are categorized as small NII. | Individual investors investing more than Rs. 10 lakh are categorized as big NIIs. |
Investment Opportunities for HNIs
- Portfolio Management Scheme (PMS): By investing in Portfolio Management Scheme it allows flexibility with a minimum investment requirement of Rs. 50 lakh.
- Market Linked Debentures (MLDs): Market Linked Debentures generally track benchmark indices like gold, equity, and government securities to mitigate direct exposure risk.
- Real Estate Funds/Commercial Real Estate: By investing in the real estate sector or exploring opportunities in Real Estate Investment Trusts (REITs) can create diversified portfolios.
- Angel Investing/Unlisted Equity: Venture into start-up investments to diversify risks effectively.
Tax Rate for High Net Worth Individuals (HNIs)
The base tax rate for HNIs is 30%,
HNIs are also be subject to a surcharge based on the income. Surcharge Rates are :
| Income | Old Tax Regime Rates | New Tax Regime Rates |
| Less than Rs.50 lakh | - | - |
| Rs.50 lakh - Rs.1crore | 10% | 10% |
| Rs.1 crore - Rs.2 crore | 15% | 15% |
| Rs.2 crore - Rs.5 crore | 25% | 25% |
| More than Rs.5 crore | 37% | 25% |
Tax Savings Options for High net Worth Individuals
Tax benefit under Section 80C : HNIs can invest in -
- ELSS mutual funds for a lock-in period of three years.
- National Pension Scheme
- Unit Linked Insurance Plans
- Public Provident Fund etc.
Note : Maximum Limit is Rs. 1.5 lakh
Tax benefit under Section 80D : Deductions can be claimed for health insurance premiums -
| Category | Age Below 60 years | Age Above 60 years |
| Self, Children, Spouse | INR 25,000 | INR 50,000 |
| Parents | INR 25,000 | INR 50,000 |
| Preventive Healthcare | INR 5,000 | INR 5,000 |
Note : Max Deduction for age below 60 years can be claimed is 50,000 and for age below 60 years is 1,00,000
Tax benefit under Section 80G : Deductions can be claimed for donations to charitable institutions.
Note : Deduction of up to 100% or 50% with or without restriction, as provided in Section 80G.
Capital Gains Tax benefits for High net Worth Individuals
- Indexation Benefit: HNIs can use the cost inflation indexation benefit to adjust asset acquisition cost for inflation to lower capital gains.
- Exemptions and Deductions: HNIs can utilize exemptions for specific investments like like Capital Gain Bonds issued by the National Highways Authority of India (NHAI) or Rural Electrification Corporation (REC).
- Capital Loss Set-Off: HNIs has the benefit to offset capital losses against gains to reduce tax liability.
- Reinvest capital gains : HNIs can reinvest the capital gains for to get tax exemptions under Section 54EC.
- Startups and Venture Capital Funds: Investing in eligible startups for tax benefits can be availed under Section 54GB.
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