Difference between NRI and PIO

NRI and PIO are citizens of India who are working or residing in any foreign country. However, there is still confusion among people about the difference between NRI and PIOs. The major difference between NRI and PIO bank accounts is certain inclusions and exclusions provided under Indian laws.

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PIOs are also eligible to open bank accounts and enjoy all the benefits that are provided under each NRI bank account as same as all the other NRIs. Both NRI and PIO have similar benefits, tax deductions, right to stay within the country, permission to visit etc.

A person who is not residing in India but comes under any one of the above-mentioned categories must know the difference between NRI and PIO for opening a bank account in India. Let us understand the difference between NRI and PIO is discussed in detail.

Who is a Non-Resident Indian (NRI)?

Indians who are residing in India for a minimum of 182 days in a year or 365 days in the last four years are known as residents of India.

Any Indian who does not meet these requirements; and live in any other foreign country are known as a Non-Resident Indian.

NRIs are eligible to open a bank account in India, buy properties in India but are restricted from some activities within India. These people must have Indian citizenship and Indian origin. NRIs are eligible to even vote during elections in India. Income earned by NRIs is not taxable in India.

Several financial institutions (that functions under the RBI) and some other banks in India offer the facility for opening an NRI account in India. Each NRI account provides facilities under Indian Tax Laws and other rules provided under Indian laws.

NRIs can stay outside of India for the following reasons:

Permanent job offer abroad
Business Trip
Stay in a foreign country for an uncertain duration
Temporary job offer or an internship

What are the Types of NRI Accounts?

Every bank offers different types of NRI accounts, which function under certain terms and conditions of the bank. These bank accounts can be opened by both NRIs and PIO cardholders who reside in any foreign country (except Bangladesh and Pakistan).

Each type of NRI account serves a unique purpose and is designed for providing a particular service to the account holder. These bank accounts are specifically made for helping NRIs despite the fact of them being in India or not.

Here is a rundown of the three types of NRI accounts in each bank:

Non-Resident Ordinary Account (NRO)

The purpose of having this account is to save or maintain an income that has been earned in India. This account can maintain the income earned like – rents, dividends etc.
Non-Resident External Account (NRE)

This account can be opened for maintaining funds that are from the foreign country in, which the NRI is residing. These foreign currencies will be converted to Indian rupees (INR) and saved in this NRE account.
Foreign Currency Non-Resident Account (FCNR)

These accounts can be maintained by NRIs or PIOs. They can deposit any foreign currency in this account. The currency should have been accepted under RBI’s rules.

What are the Benefits of an NRI Account?

Certain benefits are specific to NRI accounts and provide several specific benefits under each account. PIOs who own an NRI account are also eligible to enjoy all the benefits as an NRI. There isn’t much difference between NRI and PIO under this factor.

Some of the benefits of having an NRI account are listed below:

NRI accounts make it simple for the NRI to manage their money when they are in and outside of India. NRI accounts can be managed and accessed from anywhere in the world.
NRI accounts can be easily opened even while the NRI is staying abroad. Since the documentation and processing are done online, these accounts can be opened from anywhere in the world and money deposits can also be made online.
NRI accounts help the account holder in reducing tax liabilities in India.
When an NRI holds an NRI account, they can make investments in market-linked assets and even participate in debt markets and stocks in India.
Repatriation of up to 1 million USD per year from an NRO account is subject to Income Tax Deductions. Investments can also be made based on repatriation.

What is Meant by Persons of Indian Origin (PIO)?

Persons of Indian Origin (PIO) are people who are Indian by birth or have a family of Indian Origin. People who are residing in other countries but own Indian citizenship and people who have an Indian parent or Indian grandparents are known as PIOs.

PIO cards can be issued for people under the above-mentioned categories. These PIO cardholders can stay in India for working, studying or even visit India for up to 15 years from the date of the card issued to them.

However, PIO cardholders must take permission from the Foreign Regional Registration Office for visiting certain restricted places within India.

Persons who are citizens of Bangladesh and Pakistan are excluded from being a PIO. Other than that, a person can be called a PIO if they have any one of the following qualifications:

Had an Indian passport before or have an Indian passport now.
They must have parents or a grandparent who is an Indian citizen.
Their spouse must be an Indian or an Indian citizen without being a citizen of Bangladesh or Pakistan.

What are the Benefits of a PIO card?

Benefits of having a PIO card differ from being an NRI. Certain benefits are specified to a PIO cardholder. Benefits provided for a PIO cardholder cannot be given to anyone except them, even an NRI.

A PIO card provides certain benefits for the person who holds the card. The following are the major benefits that can be enjoyed by the cardholder in India:

PIO cardholders can visit India without a visa for up to 15 years from when the card has been issued to them.
PIO cardholders can stay for up to 180 days in India without registration to FRRO.
PIO cardholders can study in India or work in private institutions of India without any visa.
Financial and Economical benefits are provided with the same as NRIs.

Understanding the Difference between NRI and PIO

The only difference between NRI and PIO is that NRIs are citizens or once residents of India who stay in a different country for more than 182 days (except Pakistan and Bangladesh).

However, a PIO cardholder is a person who is an Indian by birth or has an Indian descendent (parents or grandparents except being a citizen of Pakistan or Bangladesh) or even a spouse who is an Indian citizen.

The major difference between NRI and PIO are the inclusions and exclusions provided under each category. The basic difference between NRI and PIO, and other details are discussed in detail below:

NRIs are people who are citizens of India who live abroad whereas PIOs are people who have Indian parents, grandparents or an Indian spouse.
An individual who spent 182 days in India for one year will be known as an Indian resident whereas PIO cardholders can visit India at any time and stay for 180 days in India.
NRIs hold voting rights in India whereas PIO cardholders are refused to have voting rights in India.
NRIs are eligible for public offices while PIO cardholders are ineligible to hold a public office in India.
NRIs need not get permission to visit restricted places in India whereas PIOs need to take permission from Foreign Regional Registration Office to visit certain restricted places in India.

What are the Investment Facilities for NRI and PIOs?

Investment facilities are provided for both NRIs and PIO cardholders in India. The following are the additional facilities that are available for foreign investors:

Deposits

Deposits are a mode of investment that can be made under bank accounts that are available for NRIs and PIO card holders like NRE account, FCNR account and NRO account.
Repatriation

Repatriation of around 1 million USD per year from an NRO account is subject to Income tax deductions.
1. Investment on Repatriation
  
  Investments can be made on a repatriation basis like the FDI, Treasury bills, Domestic mutual funds, Bonds etc.
2. Investment in Non-Repatriation
  
  Investments can also be made on a non-repatriation basis like the Money market mutual funds in India, Chit Funds, Postal savings etc.
Immovable property

Investments can be made on immovable properties other than farmhouses or agricultural properties.
Transmission of Inheritance

There is no permission required for transmitting an Inheritance to a legal heir of the property.
Housing Loans

NRIs and PIO cardholders can get housing loans for purchasing any property in India.

Conclusion

Non-Resident Indians (NRIs) and Persons of Indian Origins (PIOs) both have different banking and investment needs. It is the responsibility of each bank for meeting the customer’s needs whether they are residing within India or abroad.

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*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C apply.

“Tax benefit is subject to changes in tax laws. Standard T&C apply.”

†Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. The sorting is based on past 10 years’ fund performance (Fund Data Source: Value Research). For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in

Past 10 Years' annualised returns as on 01-12-2024

^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.

*All savings are provided by the insurer as per the IRDAI approved insurance plan.

Tax benefit is subject to changes in tax laws. Standard T&C Apply
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^^The information relating to mutual funds presented in this article is for educational purpose only and is not meant for sale. Investment is subject to market risks and the risk is borne by the investor. Please consult your financial advisor before planning your investments.

#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).