What Are The Taxation Rules For People With Dual Citizenship?

Being a citizen of a country gives you a host of rights and privileges that you can exercise within the purview of the law. However, it also comes with several duties and responsibilities that you must fulfil.
 

Some countries also enable their citizens to procure the citizenship of another country while retaining their current citizenship. But does that also apply to Indian citizens? This blog can help you understand the concept of dual citizenship in India and the different taxation rules that apply to them.

What is Dual Citizenship?

Dual citizenship means an individual can have more than one nationality, granting them country-specific rights and benefits. For example, individuals with dual or multiple citizenship can work, study, and reside in both countries.
 

This also gives one access to quality privileges such as education, healthcare, social security, and more.
 

Furthermore, individuals with dual citizenship can hold multiple passports, which enables them to travel easily. Hence, they can enjoy the benefit of visa-free travel to most countries.

Is Dual Citizenship in India Permissible?

The Indian Constitution offers no provisions for dual or multiple citizenships. However, an Indian can choose to acquire a second passport from another country, but doing so requires them to surrender their Indian citizenship.
 

Under the Passports Act of 1967, it is mandatory for every Indian resident to surrender their Indian passport to the nearest embassy if they acquire citizenship in another country.
 

After obtaining foreign citizenship, Indians are required to obtain Overseas Citizens of India (OCI) status.
 

To acquire dual citizenship, one must meet these requirements:
 

1. According to Articles 5, 6, and 8, individuals who voluntarily apply for citizenship of a foreign state will cease to be Indian citizens.

2. The individual will assume the nationality of the foreign state for which they have applied for citizenship.

3. Individuals must surrender their Indian passports and any other documents establishing their Indian citizenship at the nearest Indian embassy.

Although India does not have dual citizenship provisions, individuals can obtain an OCI card, which offers multiple benefits. However, let us check what tax rules apply to them before delving into the OCI benefits.

Taxation Rules for OCI Holders

1. An OCI's foreign income and interests from non-resident rupee bank accounts are exempt from taxation, while income from Indian sources is subject to Indian taxes.

2. Taxability in India is determined by the period of time an individual stays in India, which helps establish their residential status.

3. If a person visits India and stays for more than 182 days in a financial year (e.g., 2017-18), they will be liable to pay dual citizen tax in India.
    

Tax Exemptions from Income Tax

1. When it comes to the income tax rules for NRIs and PIOs, they exempt from investment taxation, such as deposits in:

• Non-Resident External Rupee Accounts (NRE) and Foreign Currency Non-resident Accounts (FCNR)
   

Tax Exemptions from Wealth Tax

1. When OCIs return to India for permanent residence, there will be no wealth tax imposed on the assets brought from their respective foreign countries for a period of 7 years.

2. The current wealth tax rate is 1% and will be leviable on the amount in excess of Rs. 30 lakhs of the Net wealth as of March 31st each year.

Important Points to Remember

1. Interested and eligible individuals can apply for the OCI scheme through the online portal www.mha.nic.in.

2. If the application form is filled in India, the application fees are to be paid via a Demand Draft:

   • General category: ₹15,000

   • PIO holders: ₹1,400

   • Minor PIO cardholders: ₹8,000

3. Normally, OCI registration takes 30 days to be granted, but it can take up to 120 days if further clarification is required.

4. Applicants granted registration under the OCI scheme receive an OCI Registration Certificate and a lifelong visa sticker on their foreign passports.

Benefits for Registered Overseas Citizens of India (OCI)

1. OCIs can visit India anytime, for any purpose and duration, without a separate work permit. They can do so with a ‘U’ visa.

2. They are entitled to equal treatment as any non-resident Indian with respect to financial, economic, and educational matters, except for investment in agriculture and plantation properties.

3. OCIs can stay in India for any period without reporting to authorities or registering with the police.

4. OCI holders must pay the same entry fees as Indian nationals for visiting museums, monuments, national parks, and sanctuaries in India.

5. They are charged the same tariffs for domestic flights as Indian citizens.

6. An OCI holder can practice as a doctor, lawyer, CA (Chartered Accountant), or architect in India without discrimination against Indian citizens.

Eligibility Criteria to Apply Under the OCI Scheme

1. Individuals who were eligible to be citizens of India as of January 26, 1950, but are foreign citizens.

2. Individuals who became Indian citizens on or after January 26, 1950, but are foreign citizens.

3. Persons who belonged to a part of Indian territory after August 15, 1947, but were foreign citizens.

4. Children, grandchildren, or great-grandchildren of any of the above citizens.

5. Minors can also be eligible to apply for an OCI card.

Restrictions for OCI Holders

1. They cannot hold an Indian passport or cast votes.

2. They cannot be candidates for Lok Sabha or Rajya Sabha (Indian Parliament).

3. OCI holders cannot work as employees in the Government of India.

Under the Citizenship Act of 1955, an OCI holder can be granted Indian citizenship if they are registered as an OCI for five years and have resided in India for at least one year within that period.
 

Among the other benefits OCIs and NRIs enjoy, one can also purchase an NRI insurance policy of their choice in India. With an NRI insurance plan, they can pay the premiums either in Indian currency or secure their family members under a single comprehensive insurance plan.

When it comes to selecting, such as policy as per your preference, Tata AIA Life Insurance company ensures that you have ample options in life insurance, complete with multiple choices in life cover, premium payment options, the ease of an online purchase and tax benefits on the policy.

Conclusion

Dual nationality in India has several benefits. But one should also consider all the tax implications of having dual citizenship as an OCI cardholder. This enables better tax planning for OCIs to boost their investments and access life insurance benefits in India.