Completely Different Taxation Rules for OCI Cardholder

Most of the OCI cardholders think that they have to follow the same rules and regulations as an NRI, but that is not the truth. OCI cardholders have their own set of rules and regulations.

These rules and regulations for OCI cardholders include taxation, residency, bank account, and other taxation rules in accordance with FEMA regulations.

Read this guide carefully and solve all your issues and queries related to taxation for the OCI cardholders in 2025. 

OCI is Not the Same as NRI

There is a common misconception that OCI cardholders and NRIs are treated as equals, but the reality is otherwise. Both have their own different taxation policy. Here is a quick breakdown between the OCI and NRI. 

If anyone states that "I have an OCI card, then I will be automatically an NRI. This statement is entirely incorrect. 

• An OCI (Overseas Citizenship of India) is a visa and an identification status of a foreign national.
• On the other hand, an NRI is a tax residency category. 

Here are the qualifications of an OCI cardholder: An OCI cardholder can be the following:

• An OCI cardholder can be a Non-resident. 
• An OCI cardholder can be a resident. 
• A Resident but Not Ordinarily Resident (RNOR) can also be an OCI cardholder. 

All this depends on your stay in India, which is whether you stay in India for more than 182 days in a financial year, 60 days in a financial year, or 365 days in the last four preceding years. 

Additionally, an OCI card does not provide you with a general tax exemption in India. 

Residency Rules for the OCI Cardholders

The taxation of OCI cardholders is determined by the number of days they have stayed in India. 

Here are a few of the conditions listed below for OCI cardholders' residency rules. 

You will be considered a Non-resident of India if you meet the conditions given below: 

• If you have stayed in India for less than 182 days. 
• If you have stayed in India for less than 120 days and your Indian income is less than 15 Lakhs INR. 

You will be considered a Resident if you meet the conditions given below: 

• If the number of stays in India exceeds 182 days in a financial year. 
• If the number of days spent in India is more than 120 days and the Indian income exceeds 15 lakhs INR.

ROR (Resident and Ordinarily Resident): 

• He or she is a resident of India for 2 of the 10 financial years. 
• The number of days in India should be at least 730 days in the 7 preceding financial years. 

RNOR (Resident but Not Ordinarily Resident): 

RNOR is applied for OCI cardholders who have recently shifted or moved back to India. Under this status, they will get tax relief, and their foreign income may not be taxed in India. 

OCI Taxation In India

If an OCI cardholder lives in Indian, any income earned in Indian as an OCI cardholder is subject to tax accordingly. 

Here are some conditions under which an OCI cardholder must pay tax, like a typical Indian resident. 

• When an OCI cardholder's number of stays in India exceeds the prescribed limit. 
• If the total Indian Income of the OCI cardholder crosses INR 15 lakh. 
• If an OCI holder stays in India for a long time for retirement plans, family gatherings, or any other job or employment work. 

Taxation of OCI Cardholders Who Become Indian Residents

Here is the taxation of the OCI cardholder who has not become an Indian resident. 

• If your residency status changed from OCI to resident, then you will have to pay the tax on your global income in India. 
• After you get the resident status, you need to report your foreign bank accounts, foreign investments, and properties. 
• Your NRE Income becomes taxable in India. 
• You need to follow all FEMA and Indian Bank rules for mandatory conversions, such as converting NRE or NRO into an Indian savings account.

OCI Cardholders' Rules for NRE/NRO Accounts

 An OCI cardholder can open NRE/NRO bank accounts in India by following certain rules and regulations that depend on their residential status and Indian Tax laws.

NRE Account Rules for OCI Cardholders: You can use your NRE account only when you qualify as an NRI for tax purposes under the FEMA rules and regulations. 

These NRE accounts are allowed only when: 

• You are living outside India for any work or a job purpose, business, or to stay for a long time in a foreign country. 
• If, as an OCI cardholder, you are earning an Income from outside India. 
• If you qualify as a non-resident of India under the Foreign Exchange Management Act. 

Major Key rules for the NRE Account in India as an OCI cardholder: 

• OCI cardholders can hold a savings account, a current account, an FD, and an RD NRE account in India. 
• In an NRE account, you can repatriate the full amount, including principal and interest. 
• Any interest earned on the NRE account is tax-free in India. 
• If you have permanently returned to Indian and your residency status has been changed to resident of India, then you need to re-designate to an Indian resident savings account. 

NRO Account Rules for OCI Cardholders: An NRO account can be opened by an OCI cardholder without any change in citizenship. They can open an NRO account to manage their Income, which is generated in India. 

Here are some of the uses of an NRO account by OCI cardholders:

• An OCI cardholder can use their NRO account to get rents from their Indian commercial or residential property. 
• An NRO accounts are also used by OCI holders to get their Indian pension. 
• It is also used to get the interest and dividends from your investments in India. 
• If an OCI cardholder has an Indian income source in India, then he or she can open an NRO account. 

Major Keys Rules of the NRO Account for OCI Cardholders

• An NRO account interest is taxable in India. 
• On an NRO account, TDS is applicable at the 30% rate with surcharges and cess. 
• Under an NRO account, an OCI cardholder gets a repatriation limit of 1 million USD in a financial year. 
• An NRO account can be opened with a joint account with Indian resident close relatives or family members. 
• Through an NRO account, you can make local payments in India.

Conversion Rules for OCI Cardholders in India

Given below are some of the conversion rules for the OCI cardholders, as per the FEMA regulations, who moved back to India and became residents of India. 

OCI Card Rules as per FEMA and Income Tax 

When an OCI cardholder moves back to India, they might get confused between the FEMA and income tax rules. Here are the separate rules given by FEMA and the Income tax so that you don't mix up each other's regulations. 

Foreign Exchange Management Act (FEMA) decides: 

According to FEMA, the residency status in India is based on the purpose and the reason for staying in India.

• FEMA decides which bank accounts you can hold as an OCI cardholder in India. 
• It also makes the property ownership rights. 
• It also guides the OCI cardholders to invest and gives permission for the investments in India. 
• FEMA also manages the repatriation rules for OCI cardholders in India. 

The Income Tax Department in India decides: 

According to the Income Tax Department, the residency status in India is determined by the number of stay in India in a financial year. 

• The Income Tax Department in India decides how much tax you want to pay in India on the income that you have earned in India or received in India. 
• It also decides how your foreign income is taxed. 
• The Income Tax Department also decides whether the OCI cardholder needs to report their global income in the Indian Income Tax return.

Final Thoughts 

When an OCI cardholder moves back to India, then he or she needs to manage their taxation and residency rules, which is a complex process done alone. So, in this case, Visament is the best choice for you, which will help you easily determine your residency status in India and also manage your foreign assets and taxation with ease. 

Visament has years of experienced agents who know all the documentation and tax planning that help OCI cardholders to manage their NRO/NRE accounts in accordance with all the FEMA and income tax rules, and also provides you with a well-structured plan for reporting foreign income for long-term staying in India. 

For more information, you can contact your Visament website, where you will get 24/7 active support services to get all the answers to your issues and queries from our expert agents.