Tax Structuring Through Investment Vehicles in India

Tax structuring contains the strategies and plans that help reduce tax amounts; a legal way to minimize taxation and keep as much wealth as possible. Investment vehicles are products or modes of investment used for positive gains/returns and are used for reducing tax burdens by exercising exceptions in law. Some tax-efficient investment vehicles include insurance, PPF, NPS, deposits, etc. Exceptions can be sought through the Income Tax Act while using these investment vehicles.

Fri Nov 11 2022 | Govt. Agencies and Taxation | Comments (0)


Tax structuring are the strategies and plans that help reduce tax amounts for self, businesses or estates. It is common practice and an essential aspect of tax planning. Tax structure assessments will assess the opportunities and methods to save on tax, based on personal and business assets and financial well-being.

In simple terms, tax structuring is nothing but a legal way to minimize taxation and keep as much wealth as possible.

What are investment vehicles?

Investment vehicles are products or modes of investment used for positive gains/returns. Such investment can be low or high risk and can be tax-free. It is a method that allows the wealth to grow. Several types of investment vehicles are held in portfolios. This diversifies the portfolio and minimizes risk with different types of assets and tax benefits.

Each investment vehicle has its associated risks and rewards. A decision on what best suits a portfolio depends on risk tolerance, financial stability and investment nuance. While deciding investment vehicles, the following elements must be examined:

Direct vs. Indirect investment vehicles

 Sl. Direct Indirect
 1.       Specific assets or securities, e.g.: stocks  &  bonds Own direct investments, e.g.: mutual & hedge funds
 2.       Lower fees Higher fees
 3.       No portfolio manager Managed by portfolio manager
 4.       Complete control Lesser control
 5.       Public and private Public and private


Tax-efficient investing vehicles

Tax-efficient investing is important because a lot of one’s earning goes into paying taxes – when this money could generate some income if smartly invested. Actual earning is always the after-tax returns as that is the actual income. Therefore, to generate tax-free income, the following investment vehicles could be used:

  In a mutual fund, a professional chooses stocks, bonds and other assets that could best suit   the   investor and his portfolio. The professional charges a fee for the same.

 Pensions funds are those established by an employer in which an employee deposits a part of their income.

 Private funds refer to pooled investments into private equity and hedge funds.


Public Investment Vehicles vs. Private Investment Vehicles

 Public Investment Vehicles Private Investment Vehicles
  • Public investment options are generally available to the public for purchase and doesn’t have a certain qualification that makes you eligible.
  • Private investment vehicles are available only for individuals that meet certain requirements like they earn a specific income or have a specific net worth.
  • Mutual funds, public provident fund and government bonds are a few examples of public investment vehicles in India.
  • Private investment vehicles include hedge funds, venture capital partnerships and private real estate investment trusts.
  • The majority of public investments are made through a brokerage firm that act as the middlemen that process the trade for the investors.
  • Private investments are majorly made directly by investors themselves or their official representatives to the company that is looking for investments.


Types of tax planning in India

Tax planning in India can take various forms. Most common are listed below:


It always makes sense to diversify your wealth in a way that gives the best tax benefits. Why would one want to pay more tax than is necessary? A well-thought plan can help in expansion of wealth, whilst ensuring that they remain within the boundaries of law. Tax matters often get obscure; hence, one must always err on the side of caution when using investment vehicles to avoid a tax burden.

Copyright 2024 – Helpline Law - HLL001


You could get in touch with our team to find a suitable lawyer for assistance.
Helplinelaw has been referring lawyers that fit your needs in terms of seniority and experience since 2001

Other Latest Articles