NRI Vs OCI

As we know, India is the second most populated country in the world. The government is still developing and has connected with some significant commercial countries around the globe. Due to technological advancements and, most significantly, employment opportunities, the abroad migration rate has been efficiently increasing every year. Besides employment factors, the two most significant causes for abroad migration are marriage settlement and higher studies. For individuals who live abroad but still want to keep their Indian roots intact, the Indian government has created several provisions to encourage them.

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Individuals living abroad and having their roots in India can be segmented into three sections – NRI, POI, and OCI. In this article, the differences between an NRI and an OCI will be clarified.

Non-Resident Indian (NRI)

To mention it, NRI is someone who is not a resident of India. However, the law is much more complicated and must be delved deeper to gain an inclusive insight into the sector.

Who is a resident of India?

A person is considered a resident of India if he/she has been staying in India for a minimum tenure of 182 days during the previous financial year of a particular year.

OR,

A person living in India for a total of 365 days during the previous four financial years and a minimum of 60 days during the last financial years is considered a citizen for a particular year.
Why understanding the sector is essential?

The essential motive for understanding the non-resident sector is to know about the tax norms and regulations. Now generally, an Indian resident has to pay taxes under the following conditions:
- Earning money outside and receiving it within the Indian territory. For example, freelance work done for JP Morgan Chase in New York and receiving the payment in State Bank of India.
- Income earned within the territory of India but received outside. For instance, the rent for a flat in Kolkata is received in American Express, Berlin branch.
- Income earned and received outside Indian Territory.
Now an NRI or a non-resident of India is eligible to pay charges for only the first two situations, which means either the income received or earned in India. Therefore, the NRI status also influences the enjoyable rights of that person.

Overseas Citizen of India (OCI)

OCI is a card issued by the government of India that denotes that a non-resident or foreigner has been permitted to stay and work within Indian boundaries. Hence, this card provides foreigners with an immigration status without any limited tenure. There are cases where PIOs of specific categories are allowed for OCI cards which have migrated from India to foreign countries (except Pakistan and Bangladesh) if the other government agrees for dual citizenship.

Who is an OCI?

An individual holding an OCI card can be an overseas citizen of India in the layman's language. So an OCI is not a citizen of India, but the Indian government has given the cardholder permission to reside and work within the boundaries of India.
Who cannot be an OCI cardholder?

Residents migrating from Pakistan and Bangladesh are not eligible for holding the OCI card. Even if their parents are citizens of both countries, the applicants will be denied having an OCI card.

Citizens who have experienced and served in military services of foreign countries are not eligible for receiving the OCI card.

Dual citizenship is not allowed by the constitution of India. Therefore the introduction of the OCI card is seen as a measure to cope with the situation. Since OCI cardholders are working and receiving their income within the territory of India, these individuals are allowed to open special bank accounts in Indian Bank branches. This topic will be discussed in further details as we go through the article.
Expiry of OCI card

Once an OCI card is issued, it does not expire and is eligible to remain valid for the whole life span of the cardholder.

Difference Between NRI and OCI

This section will deal with the differences between a non-resident of India and an Overseas Citizen cardholder inclusively. Following are the differences between NRI and OCI:

Key Difference:

There is an essential difference between the terms NRI and OCI. The term NRI is a residential status designed by the Income Tax Department of the Indian government and has efficiency only during filing Income Tax returns. On the other hand, OCI is an immigration status or special visa in layman's language provided to foreign nationals of Indian origin by the Indian government to work or live indefinitely.

Benefits and Limitations of being an NRI or OCI Cardholder

For NRIs

Advantages	Disadvantages
Availability of exceptional overseas accounts.	Not eligible for purchasing agricultural land within Indian territory.
Indian education system allows a special reservation quota.	Income earned within India will be taxable.
Eligible for being a voter in Indian elections.	-
Income earned outside India will not be taxed unless the payment is received within India.	-

For OCI Cardholders

Advantages	Disadvantages
Lifelong multiple entries for visiting India.	Not eligible for purchasing agricultural land.
No requirement for registering with local police authorities after 180 days.	Not eligible for a government job.
No requirement for special permission to work and study	Not allowed to participate in Indian elections.
Similar benefits as NRIs on financial, educational.	-

NRI Bank Account vs OCI Bank Account

There are certain types of bank accounts and deposits designed especially for the non-residents of India and those who want to keep their roots intact. There are three kinds of accounts introduced to the non-residents for keeping and saving their money. Those three accounts are:

Non Resident Ordinary Accounts (NRO)
Non-Resident External Accounts (NRE)
Foreign Currency Non-Resident (Bank) Accounts {FCNR(B)}

The accounts and eligibility criteria are the same for everyone, whether the individual is an NRI or an OCI cardholder.

The following section will give a crystal clear view of which individuals are permitted for which accounts:

NRIs are permitted for opening NRO (Non-Residents Ordinary Accounts), NRE (Non-Residents External accounts), and FCNR(B) (Foreign Currency Non-Resident Bank) accounts.
PIOs are permitted for opening NRO (Non-Residents Ordinary Accounts), NRE (Non-Residents External accounts), and FCNR (B) (Foreign Currency Non-Resident Bank) bank accounts.
OCI cardholders are permitted for opening NRO (Non-Residents Ordinary Accounts), NRE (Non-Residents External accounts), and FCNR (B) (Foreign Currency Non-Resident Bank) bank accounts. They are also permitted for opening domestic accounts in some instances.
Foreign Nationals who are employed in India can open domestic bank accounts. However, they are not permitted to open NRO (Non-Residents Ordinary Accounts), NRE (Non-Residents External accounts), and FCNR (B) (Foreign Currency Non-Resident Bank) bank accounts.
International students studying in India are permitted to open NRO (Non-Residents Ordinary accounts). They are not eligible for opening domestic accounts, NRE (Non-Residents External accounts), and FCNR (B) (Foreign Currency Non-Resident Bank) bank accounts.
Foreign tourists on a visiting trip to India are eligible to open an NRO (Non-Residents Ordinary accounts). However, they do not qualify for opening domestic accounts, NRE (Non-Residents External accounts), and FCNR (B) (Foreign Currency Non-Resident Bank) bank accounts.

So, therefore, we can see in terms of opening a bank account, an OCI cardholder will get the advantage of opening domestic accounts in some instances.

OCI vs NRI

Understanding the immigration status can be quite complicated with different rules and regulations to maintain. So far we did understand about the basic definitions, differences between a non-resident of India and an overseas citizen of India. The article also mentioned about the types of bank accounts that are permitted for each kind of status holder. However, it can get troublesome during the processes and individuals might have several questions to deal with their status. The most shared doubt that every individual faces while thinking of shifting abroad or India from their resident country is that:

Is an OCI cardholder an NRI?

A non-resident of India is an individual who has not acquired the residency of India and has not lived within Indian territory for more than 182 days of a particular financial year. The NRI status can also be given to citizens who live abroad but have the roots connected to India whether through their parents or guardians. On the other hand, OCI cardholders are foreigners or citizens who want to work or to study within the Indian territory. Both of the immigration statuses are different from each other.
Livability measures of an NRI vs of an OCI cardholder

An OCI cardholder gets the permission of living within Indian territory for an indefinite period of time. Whereas, an NRI does not enjoy these benefits and either has to rely on a visa for a certain period of time. However, according to the new rules of Indian government it is stated that if an individual gets their OCI card below 20 years of age then after attaining 20 years the individual must renew their OCI card in order to enjoy the unparalleled benefits offered by the government of India.

Conclusion

The Indian government has been designing and introducing all measures for non-residents to feel free to work and reside in the country. However, every individual planning to migrate must know the standards and features to keep their roots intact and have a humble connection between their residing country and their ancestral country.

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#The investment risk in the portfolio is borne by the policyholder. Life insurance is available in this product. The maturity amount of Rs 1 Cr. is for a 30 year old healthy individual investing Rs 10,000/- per month for 30 years, with assumed rates of returns @ 8% p.a. that is not guaranteed and is not the upper or lower limits as the value of your policy depends on a number of factors including future investment performance. In Unit Linked Insurance Plans, the investment risk in the investment portfolio is borne by the policyholder and the returns are not guaranteed. Maturity Value: ₹1,05,02,174 @ CARG 8%; ₹50,45,591 @ CAGR 4%

¶Long-term capital gains (LTCG) tax (12.5%) is exempted on annual premiums up to 2.5 lacs.

**Returns are based on past 10 years’ fund performance data (Fund Data Source: Value Research).