What are the taxation rules for people with dual citizenship?

Last Updated at: Aug 25, 2020
The government of Tamil Nadu in February 2020 affirmed that it was necessary for refugees from Sri Lanka to gain dual citizenship even though India’s central government does not have a dual citizenship policy for now.


The government seeks to tax NRIs who are carrying on substantial economic activities from India NRIs may face issues of having dual tax residence, dual homes, economic interests and dual citizenship


Dual Citizenship simply means a person is holding the nationality of two countries at the same time. The Constitution of India does not allow any person to hold dual citizenship. However, in the year 2005, the Government of India introduced a scheme of Overseas Citizenship of India (OCI) by amending the Citizenship Act of 1955. 

 Such citizenship cannot be granted to ordinary citizens but are exclusive only to a certain category of people. Persons of Indian Origin (PIOs) of certain category who had migrated from India and acquired citizenship of a foreign country other than Pakistan and Bangladesh, are eligible to get OCI. 

Famous Bollywood Actor, Mr. Akshay Kumar holds a Canadian Passport but works in India and pay all his taxes sincerely. Therefore, he is a Canadian citizen as well as Overseas Citizen of India.  

 The PIO scheme has been cancelled. With respect from 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 ‘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 to invest in agriculture and plantation properties. 
      • They 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 with vis-a-vis entry fees for visiting any museum, monuments, national park or sanctuary in India. 
      • The Tariffs for domestic flights would be same for OCI holders. 
      • OCI holders can practice in India as doctors, lawyers, CAs, architects, without any discrimination to the 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 OCI scheme are: 

  • Who is a foreign citizen but was eligible to be a citizen of India as on January 26, 1950 
  • Who is a foreign citizen but was an Indian citizen on or after January 26, 1950   
  • Who is a foreign citizen but belonged to a part of Indian Territory after August 15, 1947
  • Who is Children or grandchildren or great-grandchildren of the above citizens. Minors of such persons can also apply for OCI. 

The rights of OCI holders are restricted to the following: 

  • An OCI holder does not receive an Indian Passport 
  • They are not entitled to vote. 
  • OCI holders are disallowed from being candidates of Lok Sabha or Rajya Sabha.  
  • They are not eligible for membership at 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. 
  • They 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 is almost similar to that of a Non-Resident Indian. The only difference is that an OCI holder is permitted with a life-long visa to visit India any number of times for any purpose. 

 Taxation rules: 

Their 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. 

 Taxability in India is not determined by the country of origin. The period of time for which an individual stays in India does play an important part. This, in turn, 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:

The NRIs and PIOs are exempted from the following investments:

  • Amount that is deposited under bank accounts like Non-Resident External Rupee Account (NRE), Foreign Currency Non-resident Account (FCNR),
  • Dividends 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 they 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 for a period of 7 years. 

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

Other important points: 

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

-For general category is – INR 15000

-For PIO holders is- INR 1400

-For minor PIO cardholder- INR 8000

  1. Normally, it takes 30 days within which the OCI registration is granted. However, if any further clarification is required by the applicant, maximum it can take 120 days. 
  1. Applicants granted registration under OCI scheme shall be issued an OCI Registration Certificate and will get a life long visa sticker pasted on his foreign passport.

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