Both Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs) reside outside of India. They often require specialised financial services to manage their assets and investments. Here, their respective NRI and OCI status is crucial in facilitating their banking needs while ensuring compliance with regulatory norms.
Who is a Non-Resident Indian (NRI)?
An NRI or Non-Resident Indian is an individual of Indian origin who ordinarily resides outside India for most of the year.
Who is an Overseas Citizen of India (OCI)?
An Overseas Citizen of India (OCI) is a foreign national of Indian origin who has registered under the Overseas Citizenship of India (OCI) scheme. This scheme grants them certain benefits and privileges in India, but it's distinct from Indian citizenship.
Advantages and disadvantages of being an NRI
Here are some of the advantages and disadvantages of being an NRI:
Advantages
- Tax benefits: Income earned outside India is usually not taxable in India.
- Investment opportunities: They have access to diverse investment options in the countries where they live.
- Remittance benefits: NRIs can send money back to India easily.
Disadvantages
- Tax complexities: Maintaining tax residency status and navigating different tax laws in both countries can be complex.
- Challenges of owning property: NRIs face restrictions on owning agricultural land.
Advantages and disadvantages of being an OCI
Advantages
- Investment and business opportunities: Similar to NRIs, OCIs enjoy access to most financial instruments and business ventures in India.
- Property ownership: Similar to NRIs, OCIs can own residential and commercial property in India.
- Financial flexibility: OCIs can choose whether to park their Indian earnings in taxable or non-taxable accounts based on their financial goals.
Disadvantages
- Agricultural land restrictions: OCIs cannot purchase agricultural land in India, though inheritance is allowed with specific permissions.
- Potential tax complexities: Depending on their income sources and residency status, OCIs may face some tax complexities in managing their finances in India and their origin country.
Difference between NRI and OCI
Although the difference between OCI and NRI may seem fuzzy, the major difference between NRI and OCI in India is while NRIs are Indian citizens, OCIs are foreign nationals who register themselves as OCIs under applicable rules. There is yet another category of Indians: People of Indian Origin (PIO). PIOs are not Indian citizens but they like their Indian roots to be recognised which the PIO card does. This is the difference between NRI, PIO and OCI cardholders.
Eligibility
As regards the difference between NRI and OCI, the rules are clear. An individual who stays for less than 182 days in India in a financial year is termed NRI for that financial year. However, individuals who stay in India for longer than 182 days can be considered NRIs if they intend to stay abroad for an indefinite period for reasons like education, employment or business.
An OCI is a person who was a citizen of India or was eligible to be a citizen of India at any time after the commencement of the Constitution, which was on 26 January 1950. Also, anyone who belonged to a territory that became a part of India after the Independence, i.e., 15 August 1947, is eligible to be an OCI.
Taxation
For NRIs, the income or investment returns earned in India are taxable to the Indian Government. Similarly, the Indian income of OCIs is taxable in India. Additionally, OCIs are eligible for the Double Tax Avoidance Agreement (DTAA) benefits to avoid paying taxes twice.
Admissibility to reside in India
When it comes to NRI vs OCI, residing in India is a popular topic of discussion among individuals. According to Indian law, NRIs are allowed to live in India for a maximum of 182 days a year, whereas OCIs can live in the country indefinitely. This is the major difference between NRI and OCI card holders in India.
Documentation
For NRIs, most official procedures require proof of overseas residence. On the other hand, OCIs need proof of Indian ancestry as a spouse/child of a person of foreign origin, Indian residence, or OCI cardholder.
NRI Bank Account vs OCI Bank Account
Both NRIs and OCI cardholders are allowed to open bank accounts in India.
There are primarily three types of bank accounts that NRIs and OCIs can hold: Non-Resident Ordinary Accounts (NRO), Non-Resident External Accounts (NRE), Foreign Currency Non-Resident (Bank) Accounts FCNR(B).
Non-resident Ordinary Accounts (NRO)
NRO Accounts hold the income earned in India in INR. NRO accounts allow for repatriation of up to 1 million USD per financial year. The income earned in foreign currency is converted to INR in the NRO account using the applicable exchange rate.
Non-Resident External Accounts (NRE)
NRE accounts can be used as savings, current, or fixed deposit accounts for income earned outside India. As a result, the interest earned on this account is non-taxable in India. The money is stored in INR using the applicable currency exchange rates. Also, funds in NRE accounts are fully repatriable.
Foreign Currency Non-Resident (Bank) Accounts FCNR(B)
FCNR is a term deposit account that allows both NRI and OCI to store money in any of the currencies acceptable by the RBI. These accounts provide a fixed rate of interest until their maturity. FCNR accounts are often considered the best bank account for OCI card holders by some individuals.
Here are some Axis Bank account types designed for NRIs and OCIs:
1. NRE Savings Account: This account allows you to deposit foreign earnings in India tax-free and repatriate the funds seamlessly.
2. NRI Prime Savings Account: This option offers higher transaction limits, exclusive lifestyle privileges, and enhanced banking benefits across the globe.
3. NRO Savings Account: This account enables you to securely deposit and withdraw funds denominated in rupees.
4. Resident Foreign Currency Account (RFC): This account allows you to deposit foreign currency without facing foreign exchange conversion risks. The principal and interest remain fully repatriable.
5. NRE Salary Account: It facilitates an effortless transfer of your foreign earnings to India.
Also Read: Can I convert my Savings Account to NRE Account?
Conclusion
The Indian government provides suitable laws for Indians living abroad to manage their banking and investment needs. In this respect, NRI and OCI status is crucial for individuals with Indian roots abroad. NRIs enjoy tax benefits and investment opportunities, while OCIs have financial flexibility and property ownership rights.
Axis Bank provides customised banking solutions, acknowledging the unique financial requirements of NRIs and OCIs. As the global Indian diaspora thrives, these accounts will continue to play a pivotal role in maintaining a strong connection between individuals and their ancestral country.
FAQs
What is the basic difference between OCI and NRI?
The most basic difference between OCI and NRI is that an NRI is an Indian citizen who does not reside in India for more than 182 days in a year. On the other hand, an OCI cardholder is a person who was eligible to be an Indian citizen after the establishment of the Constitution.
Can an OCI live permanently in India?
Yes, OCIs can live permanently in India. The prime objective of issuing an Overseas Citizen of India card is to give foreign subjects with Indian roots rights to reside in India indefinitely.
Can OCI and NRI apply for an Aadhaar Card in India?
Yes, both OCIs and NRIs can apply for Aadhar Cards under certain guidelines.
Can an OCI open a resident bank account in India?
Yes, OCIs can open resident bank accounts in India. As per the law, both NRIs and OCIs can open NRO, NRE, and FCNR (B) accounts.
Do OCI card holders need to pay income tax in India?
Yes, OCIs need to pay income tax on the income generated from India. This may include Indian investments or services/products provided in India. Check the latest new rules for OCI card holders before paying the income tax.
Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.
