Budget 2026-27: Time to Address India’s Fleeing Millionaire Problem

In today’s globalised world, tax policy is a strong determinant of where individuals live and build their careers. High personal income tax (PIT) rates can make a jurisdiction less appealing to high- and ultra-high-net-worth individuals. 

In recent years, wealthy individuals across the world have shown far greater willingness to relocate purely for tax and regulatory reasons. Reports indicate that Lakshmi Mittal is leaving the United Kingdom and moving to Dubai and Switzerland owing to concerns around high taxes and estate planning. Similar developments have been observed among entrepreneurs, investors, and senior professionals who are moving to tax-efficient hubs such as the UAE and Singapore.

Reports indicate a steady rise in the wealthy Indians relocating to tax-efficient hubs like the UAE and Singapore. Henley & Partners' 2025 migration data indicates that India remains among the top five countries losing the highest number of millionaires annually. An estimated 3,500 Indian millionaires are estimated to have left the country in 2025.

These trends have clear implications for India, which is competing globally for talent, capital, and entrepreneurship. Lower tax rates to check the migration of talent out of India and consequently, to protect India's tax base.

Increase in Tax Collections - What does it really mean?

The tax rates have substantially fallen over the past couple of years and the government has forgone an estimated sum of Rs. 1 lakh crores. Despite this, statistics reveal that India has witnessed a significant growth in the number of individual taxpayers as well as in the tax collected from them. For instance:

• The number of individual taxpayers rose from 99.1 million in AY 2023-24 to 116 million in AY 2024-25, an increase of 17.10%;
  

• The number of individual return filers grew from 76.4 million in FY 2023-24 to 80.9 million in FY 2024-25, reflecting 5.91% growth;

• The net non-corporate tax collections rose by 8.72% to Rs 7.19 lakh crore in FY 25-26 up to 10 November 2025, compared with Rs 6.61 lakh crore during the same period last year; and

• The income tax department also received 58.57 lakh tax returns from first-time filers until 31 July 2024.

The increase in the number of individual taxpayers and the direct tax collections from them is indeed encouraging. However, it may be worthwhile to note that the numbers may partially pertain to new individuals entering the mainstream every year. Reports indicate that more than 13 million net subscribers joined EPFO during 2023-24. Another source says that approximately 7-8 million young people are added to the labour force each year.

India's rising taxpayer base is a positive sign of formalization and growth. But the increase in collections does not automatically mean existing taxpayers are earning or contributing more. For instance, in the case of HNIs, a 25% surcharge can raise the effective tax rate to 39% (30% plus 25% surcharge and 4% cess). 

This is a very high rate and results in the migration of Indian taxpayers to other countries. Consequently, a part of the rise in taxpayers and tax collections may simply reflect more young earners joining the workforce each year. The momentum is encouraging, yet the real opportunity lies in widening participation by retaining talent that may otherwise move to low-tax jurisdictions.

India's Experiments with Low Tax Rates

We see that India has indeed experimented with low tax rates. For example, even as the corporate tax rates have been reduced from 35% to 25%, tax collections have increased from Rs. 6.63 lakh crore in FY 2018-19 to Rs. 9.87 lakh crore in FY 2024-25. This clearly shows that moderation in tax rates can improve tax compliance as well as tax collections.

Despite the success evident in numbers, the lower rates are restricted to corporate taxpayers only and have not percolated to the levels of individuals or small businesses. Many individuals conduct businesses in the form of proprietorship and partnerships / limited liability partnerships (LLPs) which are taxed at the highest rate of 30%. To encourage entrepreneurship and small and medium enterprises (SMEs), it is worthwhile for the government to bring in parity in tax rates for all kinds of business enterprises, especially proprietorships and partnerships / LLPs.

Global Studies: High Taxes Encourage Migration

International research adds depth to this understanding. OECD studies underscore that wealthy individuals are far more responsive to tax changes than other income groups, particularly with respect to income, capital gains, and wealth taxes. The OECD report reads: "HNWIs are typically more mobile and have been found to move to locations offering more favourable taxation or preferential regimes."

Similar reports further note that high taxes, policy uncertainty, and complex inheritance rules are among the top drivers prompting relocation. A study published by the Tax Foundation states that "when there are tax differences between countries, some might respond by moving to a lower-tax area. For higher-income individuals, the benefits of moving as a result of higher taxes are greater because they have more income or wealth at stake."

High taxes, limited public services, and low returns on taxes are pushing wealthy Indians to consider more predictable and business-friendly jurisdictions. Together, these factors are driving a clear shift in residency decisions among India's affluent and high-net-worth individuals. For instance, the UAE's zero tax regime for individuals and 9% rate for businesses, and Portugal's Golden Visa program, while Singapore's tax-free dividends and stable policy environment make it attractive for entrepreneurs and investors to shift their base from India to these countries.

Ripple Effects: Negative Impact on Economic Growth

The super-rich exhibit much stronger behavioural responses to tax changes than middle or lower-income groups. Such HNWIs / UHNWIs contribute to the economy not only through tax collections but also through business ownership, capital investment, and job creation. Their investments and spending fuel demand for housing, education, healthcare, and professional services. When such individuals relocate, these direct and indirect contributions tend to diminish over a period of time. Several jurisdictions with stable, moderate taxes and predictable regulatory frameworks successfully attract professionals, family offices, and cross-border investment.

Recommendations for a Revised Tax Structure

With the above background, the author makes the following recommendations concerning the PIT rate structure (under the default tax regime):

• Raising the highest PIT slab from Rs. 24 lakhs to Rs. 50 lakhs progressively considering the general income levels of the middle class;

• Reducing the tax rates as follows:

  • 20% on income up to Rs. 30 lakhs;

  • 25% on income up to Rs. 50 lakhs; and

  • 30% on income beyond Rs. 50 lakhs.

• Reduction in the surcharge rates; and

• Introducing parity in tax rates applicable to companies and other forms of business enterprises like proprietorship, partnerships, or LLPs.

Though the above recommendations are in line with the current income levels of the middle class, the Revenue may consider implementing them in a phased manner to spread the tax loss over a period of time. It is likely that the tax loss may be compensated by increased compliance and tax collection numbers.

As we await the announcement of the Budget in February 2026, it is a timely opportunity to consider revisiting the individual tax rates. Lower PIT rates are not a standalone solution, but in combination with sound governance and strategic public investment, they can be a powerful tool. India should heed global migration trends and convert this challenge into a strategic advantage.

(Disclaimer: This is an authored article, and the views expressed are solely those of the contributors and do not reflect the opinions of Outlook Business.)