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What Are The Taxation Rules For People With Dual Citizenship?

What exactly are the taxation rules for those wishing to get a dual citizenship in India through the OCI route? Keep reading to find out!

Dual citizenship simply means that a person has the nationality status of two countries at the same time. Dual citizenship is not permitted under the Indian Constitution. However, by amending the Citizenship Act of 1955 in 2005, the Government of India introduced a scheme of Overseas Citizenship of India (OCI). Taxation Rules For People With Dual Citizenship

Such a form of citizenship cannot be granted to ordinary citizens and is restricted to a specific group of people. Persons of Indian Origin (PIOs) of a specific category who migrated from India and obtained citizenship in a foreign country other than Pakistan or Bangladesh are eligible for OCI. What Are The Taxation Rules For People With Dual Citizenship

For instance, famous Bollywood actor, Mr Akshay Kumar holds a Canadian Passport but works in India and pays all his taxes sincerely. Therefore, he is a Canadian citizen as well as an Overseas Citizen of India.  

The PIO scheme stands cancelled. With respect to 9th January 2015, all the PIO cardholders shall be deemed to be Overseas Citizens of India.

Registered OCIs shall be conferred with the following benefits:

  • These individuals are entitled to a ‘U’ visa which means they can visit India at any time, for any purpose and for any period of time without obtaining a separate work permit.
  • They are treated at par with non-resident Indians in matters of financial, economic and educational purposes. However, they do not have the privilege of investing in agriculture and plantation properties. 
  • They are free to stay in India for any length of time without reporting or registering themselves with the police authorities and foreign regional registration officers. 
  • They would be treated at complete par with Indian nationals in terms of entry fees for visiting any museum, monument, national park or sanctuary in India. 
  • The tariffs for domestic flights would be the same for OCI holders as well. 
  • OCI holders can practice in India as doctors, lawyers, CAs, and architects, without causing any discrimination against Indian citizens, in accordance with the provision of the Act.  

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Eligibility criteria for individuals (other than Pakistan and Bangladesh) who wish to apply under the OCI scheme are: 

  • A foreign citizen but was eligible to be a citizen of India as on January 26, 1950
  • A foreign citizen but was an Indian citizen on or after January 26, 1950
  • A foreign citizen but belonged to a part of Indian Territory after August 15, 1947
  • A child or grandchild or great-grandchild of any of the above citizens
  • Minors can also apply for OCI

The rights of OCI holders are restricted to the following: 

  • An OCI holder is not entitled to hold an Indian passport
  • They are also not entitled to vote
  • OCI holders are disallowed from being candidates of Lok Sabha or Rajya Sabha.  
  • They are not eligible for membership at the Council of States or Legislature of any House
  • Overseas citizens are not allowed to hold posts such as Prime Minister, President, Supreme court judges, etc
  • OCI’s are not allowed to serve as an employee in the Government of India.  

Under the provisions of the Citizenship Act 1955, an OCI holder can be granted Indian Citizenship if : 

  • He is registered as an OCI for 5 years and ; 
  • Out these 5 years, he stays in India for one year. 
An OCI holder’s status is almost similar to that of a Non-Resident Indian. The only difference is that an OCI holder is permitted to have a life-long visa to visit India any number of times for any purpose. 

Taxation Rules: 

AN OCI’s foreign income and interests from non-resident rupee bank accounts are exempted from being taxed. However, all their income from Indian sources shall be liable to Indian taxes. 

This is because taxability in India is not determined by the country of origin. Do note, however, that the period of time for which an individual stays in India does play an important part. As it helps to establish his residential status. 

For example: If any person visits India in 2017-18 and stays for more than 182 days, he/shall be liable to pay taxes in India.    

Tax Exemptions from Income Tax:

NRIs and PIOs are exempted from paying tax on the following investments:

  • Amount that is deposited under bank accounts like Non-Resident External Rupee Account (NRE) & Foreign Currency Non-resident Account (FCNR),
  • Dividends received by Indian companies
  • Long term capital gains from transferring of equity shares in a company
  • Equity oriented schemes of mutual funds

Tax Exemptions from Wealth Tax:

When OCI’s return to the country for residing permanently, there will be no wealth tax imposed for the purchase of their assets brought by them from the respective foreign country. This will be applicable for a period of 7 years. 

The current rate of wealth tax is 1 % on the aggregate market value of chargeable assets as of 31st March every year in excess of ₹1.5 million. 

Other Important Points: 

  1. Those who are interested and eligible for the OCI scheme can apply through an online portal – www.mha.nic.in
  2. If the form must be filled in India, the application fees are to be paid in the form of a Demand Draft: 

-For the general category is – ₹15000

-For PIO holders is- ₹1400

-For minor PIO cardholders- ₹8000

Normally, it takes 30 days for the OCI registration to be granted. However, if any further clarification is required by the applicant, the maximum it can take is 120 days. 

Applicants granted registration under the OCI scheme shall be issued an OCI Registration Certificate and will get a life-long visa sticker pasted on their foreign passport.

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