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investments The basics Official name: Republic of India Capital: New Delhi Government type: Federal parliamentary republic Population: 1.35 billion Chief of state: President Ram Nath Kovind (since July 2017) Head of government: Prime Minister Narendra Modi (since May 2014) Currency: Indian rupees (INR); US$1 was worth about INR 71 on Oct. 9 Citizenship: At least one parent must be a citizen of India Source: CIA World Factbook, International Monetary Fund could be challenging for executors since the property is in a foreign jurisdiction, Paul says. And clients typically don’t document the cost, which would be the FMV at the time of the inheritance. Paul suggests clients get docu- mentation in place during their lifetimes, or consider selling or transferring title if, for example, their children plan to return to India. As with any Canadian resi- dent, advisors should ensure the client’s estate can cover any tax liability at death, she adds. For business-owner clients whose beneficiaries live in India, succession planning becomes an issue. Paul notes that a client’s pri- vate company shares are deemed disposed of at death, and if the new owner were a non-resident, the business would lose its status Economic transformation makes this emerging market a key driver of global growth by Michelle Schriver In May, a record 67% of India’s population voted to re-elect Prime Minister Narendra Modi, charismatic leader of the Bharatiya Janata party, in a landslide victory. While Modi’s Hindu nationalist govern- ment continues to raise concerns among those who fear for the coun- try’s secular roots, his rise to power in 2014 was largely based on his image as an economic reformer. The government’s mantra of “reform, perform, transform” was reflected in its budget released in July, which outlined plans to accelerate economic reforms and have India become a US$5-trillion economy by 2024. India’s economy now stands at US$2.7 trillion and is the world’s third largest in terms of purchasing power parity, after the U.S. and China. Modi’s policy continuity and an accommodative central bank, along with low oil prices and benign inflation, should gradually improve growth and support corporate profitability, says an HSBC Global Asset Manage- ment outlook report. Based on policy and earnings growth, the firm is overweight private financiers, commercial real estate and select domes- tic demand ideas, and underweight private capex, cars and staples. Planning considerations for clients with foreign ties Emerging markets as portfolio diversifier China and India accounted for more than 40% of global economic growth in 2018 (in purchasing power parity terms) as a result of urbaniz- ation and a growing middle class. About 53% of India’s population is expected to live in urban areas by 2050, compared to about 33% in 2015, resulting in increased con- sumption. Emerging markets (EMs) currently account for half of all Prime Minister Narendra Modi on May 23, when election results were announced ARVIND YADAV/ HINDUSTAN TIMES VIA GETTY IMAGES 18 OCTOBER 2019 International students from India are contributing to Canada’s G7-leading population growth. Sunit Paul, partner, Canadian tax at BDO in Calgary, has noticed the trend. “I see so many youngsters \\\[from India\\\] travelling to Canada for studies,” she says. “When I speak to some of them, the intent is not to go back.” The student influx is good for Canada’s economy, and presents additional planning considerations for advisors who will later serve this demographic. A typical scen- ario would be a client inheriting property in India—a distinct possi- bility as students typically come from well-to-do families, Paul says. Vikas Saida, a financial advisor at Raymond James in Missis- sauga, Ont., asks clients with foreign property the following questions: Does the property have liens or tax-filing requirements that are handled by a licensed tax advisor in Canada as well as India? Is legal documentation being maintained? Is the prop- erty held for sentimental value, or does it provide rental income? The latter would require tracking income and expenses, and a local property manager, which should be arranged before leaving India, Saida says. At death, worldwide assets are deemed disposed of at fair market value (FMV). To determine the capital gain or loss on the property, the FMV and cost are required. Ascertaining the FMV as a Canadian-controlled private corporation, with con- sequences that include loss of the small business tax rate. She also notes that naming a non-resident of Canada as an executor could result in the client’s estate being considered foreign for tax purposes, resulting in administrative com- plications. And naming non- resident beneficiaries could result in withholding tax as the client’s estate is distributed. India has no inheritance or gift tax. Many of Saida’s clients have parents in India, so he dis- cusses with them the need to establish a support structure in India, such as family or friends, in case of financial or health emergencies.