Ambiguity in decoding NRI rules

for OCI holders who become

residents of India . . .

As OCI holders are considered to be at par with NRIs, any rules that apply to NRIs are deemed to be applicable to OCI holders also. However, when NRI rules were formulated the Overseas Citizen of India [OCI] category visa did not exist. Those holding OCI assume that the rules that apply to NRIs also apply to OCI holders and sometimes for many individuals with OCI this can cause confusion in interpreting rules and regulations that may apply in a particular scenario. For instance, NRIs are not eligible to open a new PPF account, what about OCI holder’s who become residents due to duration of their stay in India and no longer qualify as NRIs? NRIs are in reality Indian citizens who are considered to be non-resident from India due to living abroad for various reasons such as employment, business etc. OCIs on the other hand are foreign citizens who may be either a non-resident or resident of India. To clarify: • To get NRI status an individual must be a non- resident of India for a set duration of time. An individual can either be considered to be NRI or a resident, they can only have one status. • OCI can be both either a non-resident or resident of India depending on the duration of their stay in India and continue to hold OCI status.

OCI has resulted in the creation of

two categories of OCI

As OCI equates to having a lifelong Indian visa, many foreigners of Indian origin have opted for OCI which eliminates the requirement to apply for Indian visas periodically. Such OCI holders are similar to Indian NRIs. However, since OCI is a lifelong Indian visa, some OCI holders have been encouraged to use their OCI visas to return to India and live there. As the Indian economy picks up, entrepreneurs, retirees and those with extended family ties in India are settling in India with OCI visas. More clarification on the dos and don’t s for OCIs is required especially for OCI holders who become resident in India but wonder whether schemes offered by the Government to Indian residents but restricted to NRIs also applies to them, even though they have become residents and no longer hold NRI status. To clarify: The best way to explain this is by way of example. Let’s consider a scheme available in India for senior citizens known as the ‘Senior Citizens Savings Scheme’ Read on . . .

Senior Citizens Savings Scheme

[SCSS]

The SCSS account is a savings account scheme that is meant to help senior citizens in India get a higher rate of interest to enhance their income. When looking at the rules applicable to opening of SCSS accounts, Non- Resident Indians (NRIs) are not eligible to open such an account. Here is an excerpt* *[Ministry of Finance notification August 2, 2004 – Updated October 29, 2004] 13. Deposits by Non-Resident Indians(NRIs) and Hindu Undivided Families (HUF):- (1) The Non Resident Indians are not eligible to open an account under these rules: Provided that if a depositor who subsequently becomes a Non-Resident Indian during the currency of the account under these rules, the account may continue till its maturity on a non-repatriation basis and the account shall be marked as a Non-Resident account: Provided further that the account continued under the above proviso, shall not be extended for any further period as provided under sub-rule (3) of rule 4. Going by the above, NRI is not eligible to open SCSS account. Now let’s look at this from the prospective of an OCI holder living in India for several years. At some point OCI holders settled in India become residents of India and then can such OCI holders who may be senior citizens not open SCSS account in India? If one goes by the analogy that OCIs are to be treated as NRIs then they cannot! However, when an OCI becomes a resident of India they can no longer be considered a NRI. In such a case they may qualify to open SCSS accounts. The same criteria would apply to any other benefit in India that makes NRIs ineligible and does not specifically restrict OCI or perhaps clearly state that the particular benefit is only available to Indian citizens. Once an OCI holder becomes resident in India they are expected to give up their non-resident accounts and get their bank accounts converted to domestic resident accounts because they are no longer considered to be NRIs. By the same analogy any benefit available to resident Indians but restricted to NRIs may become available to resident OCI holders living in India. Check with your bank or accountant to take advantage of any and all investment and banking facilities available to you in India.