NRI / OCI / PIO

Non-resident Indians are a section of people whose roots belong to India and who have migrated from India. The Indian Government is aware of the importance of Indian Diaspora in the form of NRIs/PIOs which is spread all across the world and which despite being away from India is making
significant contribution to the Indian economy on a global platform and to the economic, financial and social benefits which have been brought to India; therefore, it attempts to provide benefits to them to attract their investments. They are also called for taking part in the economy. We will see that
government gives lot of benefits to NRI not only with respect to ease of making an investment in India but also in Taxation. The investment from NRIs is easy money available and provides much-needed leverage to the economy. The Indian Diaspora today constitutes an important, and
inimitable, part of the Indian economy.
The composition of India’s external debt is undergoing a change with the share of multilateral and bilateral debt in total external debt rapidly diminishing over the years, while that of commercial borrowings and NRI deposits rising.

Under FEMA, there are different definitions of NRI in different regulations depending on the requirement of the subject for which the regulation is formulated, such as

(a) Under Foreign Direct Investment policy 2020, NRI is defined as follows

b)  Under Foreign Exchange Management (Deposit) Regulations, 2016, vide Notification No.
FEMA 5(R)/2016-RB dated April 01, 2016
” Non-Resident Indian (NRI)”1 means a person resident outside India who is a citizen of India.

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1 – FEM (Deposit) Regulations, 2000 have been repealed and replaced by FEM (Deposit) Regulations, 2016
with effect from April 1, 2016 (FEMA 5(R)), the term NRI, wherever it appeared, has been replaced by NRI
and/or PIO. Prior to this, PIOs were covered within the definition of NRI.

(c) Foreign Exchange Management (Remittance of Assets) Regulations, 2016 ‘Non-Resident Indian” (NRI) shall have the same meaning assigned under the Foreign Exchange Management (Deposit) Regulations, 2016;
(d) Foreign Exchange Management (Borrowing and Lending) Regulations, 2018
‘Non-resident Indian (NRI)’, ‘FCNR (B) Account’, ‘NRO Account’, and & ‘NRE Account’ shall have the same meanings as assigned to them respectively in the Foreign Exchange Management (Deposit) Regulations, 2016, as amended from time to time; Keeping in mind the importance of Indian diaspora abroad and the money they get in the country, NRIs/PIOs have been given many facilities in India like opening of bank accounts, investments in
real estate, etc. They can acquire immovable property in India. They are permitted to open bank accounts in India out of funds remitted from abroad, foreign exchange brought in from abroad or out of the funds legitimately due to them in India, with Authorised Dealer. Such accounts can be opened
with banks specially authorised by the Reserve Bank in this behalf [Authorised Dealer (AD)]. In this chapter, we have discussed the various investment avenues available to the NRI/PIO and regulations, condition relating to same.

Overseas citizen of India

Difference between an NRI, OCI, and PIO

Definitions

NRI

As defined in Foreign Exchange Management (Non-debt Instruments) Rules, 2019.

• (aj) “NRI” or “Non-Resident Indian” means an individual resident outside India who is a
  citizen of India;

OCI

As defined in Foreign Exchange Management (Non-Debt Instruments) Rules, 2019

Rule 2(ak) Overseas Citizen of India “OCI” means an individual resident outside India who is registered as an Overseas Citizen of India Cardholder under section 7A of the Citizenship Act, 1955 ( 57 of 1955).

The following categories of foreign nationals are eligible for registration as OCI Cardholders:

• Who was a citizen of India at the time of, or at any time after the commencement of the Constitution i.e. 26.01.1950; or
• who was eligible to become a citizen of India on 26.01.1950; or
• who belonged to a territory that became part of India after 15.08.1947; or
• who is a child or a grandchild or a great-grandchild of such a citizen; or
• who is a minor child of such persons mentioned above; or
• who is a minor child and whose both parents are citizens of India or one of the parents is a citizen of India; or spouse of foreign origin of a citizen of India or spouse of foreign origin of an Overseas
• Citizen of India Cardholder registered under section 7A of the Citizenship Act, 1955 and whose marriage has been registered and subsisted for a continuous period of not less than two years immediately preceding the presentation of the application.

PIO

The term PIO is not defined in the Rules, nor in the Act. However, Notification- 5 (R)- Deposits – issued by RBI vide Regulation 2 (x) defines the term PIO as under-

• A PIO is a person resident outside India who is a citizen of any country other than Bangladesh or Pakistan or such other country as may be specified by the Central Government, satisfying the following conditions:

a) Who was a citizen of India by virtue of the Constitution of India or the Citizenship Act,1955 (57 of 1955); or
b) Who belonged to a territory that became part of India after the 15th day of August
1947; or
c) Who is a child or a grandchild or a great-grandchild of a citizen of India or of a person
referred to in clause (a) or (b); or
d) Who is a spouse of foreign origin of a citizen of India or spouse of foreign origin of a person referred to in clause (a) or (b) or (c)
Explanation: For this regulation, PIO includes an ‘Overseas Citizen of India’ cardholder
within the meaning of Section 7(A) of the Citizenship Act, 1955.

Difference

The NRI are the citizen of India, however, PIO and OCI are not the citizen of India. Although PIO/ OCI may be resident of India.

Constitution of India doesnot allow the dual citizensip. However, to give benefit similar to Dual citizenship, the concept of The PIO card was first implemented in 2002 as a benefit to foreign nationals who could establish at least a third generation tie to Indian origin and The OCI card was implemented in 2005. OCI cardholder carried more expansive benefits than the PIO card, and was valid for the holder’s lifetime.

The difference in PIO and OCI

Table

Merger of PIO and OCI

The Government of India has merged both cards through the amended act Citizenship (Amendment) Act, 2015 in Overseas Citizen of India Cardholder (“OCI cardholder”).
Following transitional measures was put in place to transfer the PIO cardholder
(1) As on date, all Person of Indian Origin (PIO) cardholders with valid PIO cards as on 9.1.2015 are deemed to be Overseas Citizen of India (OCI) cardholders in terms of the notification issued by the Ministry of Home Affairs on 9.1.2015.
(2) However, all persons having valid PIO cards as on 9th January, 2015 are advised to apply for registration as OCI cardholder in view of the following advantages in possessing an OCI card:-

(a) OCI card is a smart card

(b) Possession of an OCI card will facilitate quicker immigration clearance at the Immigration Check Posts

(c) It will help in obtaining various Consular Services from the Indian Missions

(d) For those who are resident in India, it will facilitate in availing various services in
India.

(3) The date for submission of applications for registration as OCI cardholder in lieu of the PIO card online has been extended till 30th June,2017. This cutoff date will be only for submission of the applications online by the applicants. A separate online application form for submission of
application for registration as OCI cardholder in lieu of PIO card is available in the website https://passport.gov.in/oci/
(4) The erstwhile PIO cardholder with a valid PIO card as on 9.1.2015 will have to upload only the following documents with his/ her application:- (a) Copy of the valid Passport (b) Copy of the PIO card
(5) The applicants can submit the applications online from anywhere. The grant of OCI card in lieu of the PIO card will be on a gratis basis.
(6) The OCI card shall be issued by the Indian Mission/ Post/ FRRO concerned within the jurisdiction of the applicant‟s place of residence. The applicant will have to approach the Indian Mission/ Post/ FRRO concerned only for collecting the OCI Card by surrendering the PIO card.

PIOOCIOCI Cardholder

Benefits available to OCI Cardholder

As per NOTIFICATION S.O. 1050(E) issued by MINISTRY OF HOME AFFAIRS NOTIFICATION New Delhi dated 4th March, 2021 following benefits are available to an OCI Cardholder:
(1) grant of multiple entry lifelong visa for visiting India for any purpose: Provided that for undertaking the following activities, the OCI cardholder shall be required to obtain a special permission or a Special Permit, as the case may be, from the competent authority or the
Foreigners Regional Registration Officer or the Indian Mission concerned, namely:-

(i) to undertake research; (ii) to undertake any Missionary or Tabligh or Mountaineering or Journalistic activities; (iii) to undertake an internship in any foreign Diplomatic Missions or foreign Government organizations in India or to take up employment in any foreign Diplomatic Missions
in India; (iv) to visit any place which falls within the Protected or Restricted or prohibited areas as notified by the Central Government or competent authority;
(2) exemption from registration with the Foreigners Regional Registration Officer or Foreigners Registration Officer for any length of stay in India: Provided that the OCI cardholders who are normally resident in India shall intimate the jurisdictional Foreigners Regional Registration
Officer or the Foreigners Registration Officer by email whenever there is a change in permanent residential address and in their occupation;
(3) parity with Indian nationals in the matter of,- (i) tariffs in air fares in domestic sectors in India; and (ii) entry fees to be charged for visiting national parks, wildlife sanctuaries, the national monuments, historical sites and museums in India;
(4) parity with Non-Resident Indians in the matter of,- (i) inter-country adoption of Indian children subject to the compliance of the procedure as laid down by the competent authority for such adoption;(ii) appearing for the all India entrance tests such as National Eligibility cum Entrance Test, Joint Entrance Examination (Mains), Joint Entrance Examination (Advanced) or such other tests to make them eligible for admission only against
any Non-Resident Indian seat or any supernumerary seat: Provided that the OCI cardholder shall not be eligible for admission against any seat reserved exclusively for Indian citizens;
(iii) purchase or sale of immovable properties other than agricultural land or farm house or plantation property; and (iv) pursuing the following professions in India as per the provisions contained in the applicable relevant statutes or Acts as the case may be, namely:- (a) doctors, dentists, nurses and pharmacists; (b) advocates; (c) architects; (d) chartered accountants;
(5) in respect of all other economic, financial and educational fields not specified in this notification or the rights and privileges not covered by the notifications made by the Reserve Bank of India under the Foreign Exchange Management Act, 1999 (42 of 1999), the
OCI cardholder shall have the same rights and privileges as a foreigner.

Benefits to which OCI Cardholder is not entitled to:

The OCI Cardholder is not entitled to vote, be a member of Legislative Assembly or Legislative Council or Parliament, cannot hold Constitutional posts such as President, Vice President, Judge of Supreme Court or High Court etc. The OCI Cardholder shall not be entitled for appointment to public services and posts in connection with the affairs of the Union or of any State except for appointment in such services and posts as the Central Government may, by special order, in that behalf, specify. Further, as stated in para 5 above, the OCI Cardholder cannot acquire agricultural or plantation properties in India.

Overseas Corporate Body (OCB)

Clause (xi) of Regulation 2 of Foreign Exchange Management (Deposit) Regulations, 2000, Notification No. FEMA 5 /2000-RB dated 3rd May 2000 defines“Overseas Corporate Body (OCB)”; a company, partnership firm, society and other corporate body owned directly or indirectly to the extent of at least sixty per cent by Non-Resident Indians and includes overseas trust in which not less than sixty percent beneficial interest is held by Non resident Indians directly or indirectly but irrevocably;” Overseas Corporate Bodies (OCBs) have been derecognised as a class of investor entity in India with
effect from September 16, 2003 and subsequently the regulation Foreign Exchange Management [Withdrawal of General Permission to Overseas Corporate Bodies (OCBs)] Regulations, 2003 vide notification FEMA 101 /2003-RB dated October 3rd , 2003 was enacted. As per Reserve Bank of
India (“RBI”) circular dated September 16, 2003 – A.P.(DIR Series ) Circular No.14. OCBs shall not open and maintain Non-Resident (External) Rupee Account (NRE), Foreign Currency (Non-Resident) Account (Banks) [FCNR(B)] Accounts and Non-Resident Ordinary Rupee (NRO) Deposit Account with Authorised Dealers in India with immediate effect. Also, All existing NRE (Savings, Current) Accounts of the OCBs (other than the accounts referred to in para 4 below) shall be closed forthwith and balances repatriated strictly as originally authorised, expeditiously. The existing NRE Deposits (Recurring or Fixed), FCNR (B) Accounts and Non-Resident Ordinary Rupee (NRO) Deposit (Recurring or Fixed) Account may be permitted to continue till original maturity. The maturity proceeds of NRE Deposits and FCNR (B) shall be repatriated expeditiously. Also, No new NRE / FCNR / NRO Accounts in the name of OCBs shall be opened and no renewal of deposits shall be made.

Any OCB which held any investment in India on the date of afore mentioned circular will need prior approval of RBI for investment in India. RBI vide circular no. 44 dated 8th Dec 2003 issued detailed clarifications on to address various operational issues associated with the exit arrangements for OCBs. As per the circular any OCB which did not have any investment as on 16th September 2003, can invest in India like any other foreign company. It will not get any privilege which was earlier available to an OCB. The reason for derecognising OCBs was gross misutilisation by some investors for stock
market investments.