The Difference Between NRI and PIO

In everyday conversations, many tend to use the terms NRI and PIO interchangeably. Yet, by diving deeper into the subject, it becomes evident that there's a significant difference between NRI and PIO.

The nuances distinguishing NRI vs PIO might seem trivial, but these distinctions have profound implications, especially when considering their rights, available investment options in India, and the types of bank accounts they can open.

To help you navigate this difference, this article will shed light on these distinctions and guide you in understanding the various banking avenues available to each category.

Who are Non-Resident Indians (NRIs)?

The term ‘NRI’ stands for Non-Resident Indians and refers to individuals of Indian origin residing outside of India.

Interestingly, despite the term suggesting otherwise, an NRI remains an Indian citizen and possesses an Indian passport even though they predominantly live outside of India.

Determining an individual's residential status becomes crucial, especially when it comes to taxation under the Income Tax Act. While Section 6 of this act doesn't offer a direct definition of an NRI, it delineates the criteria to be deemed a resident of India.

The criteria specify that one is considered a resident of India if they have either:

1. Spent 182 days or more in India during the previous financial year.
2. Stayed in India for a minimum of 60 days in the previous financial year and accumulated a stay of 365 days or more over the four years preceding that year.

To illustrate, 

Consider the financial year 2023-24. If we look back at the previous financial year, i.e. 2022-23, a person would qualify as a resident if they stayed in India for at least 182 days during 2022-22. Alternatively, if they were in India for 60 days or more in 2022-23 and had also been in India for a combined 365 days during the four years from 2018 to 2021, they would also be classified as a resident.

Anyone not meeting these stipulations is labelled an NRI. It's worth noting that NRIs have the privilege of opening specific bank accounts in India, allowing them to invest, transfer funds to relatives in India, or securely manage their Indian incomes such as pensions or rental earnings.

Who is a Person of Indian Origin (PIO)?

A Person of Indian Origin (PIO) is an individual who either has Indian roots by birth or descends from a family originating from India. Essentially, if you live abroad but hold Indian citizenship or have either an Indian parent or grandparents, you're recognised as a PIO.

For those fitting these criteria, the government issues PIO cards. Holders of these cards enjoy certain privileges in India. With a PIO card, one can work, study, or simply visit India, and this is valid for up to 15 years from the date of issuance.

With that said, it's worth remembering that there are specific areas within India that PIO cardholders cannot access without obtaining permission from the Foreign Regional Registration Office.

But there are exceptions. Citizens from Bangladesh and Pakistan, for instance, aren't eligible for the PIO status. Outside of this exclusion, to qualify as a PIO, an individual should meet at least one of these conditions:

• They have held an Indian passport at some point or they currently possess one.
• Either their parents or a grandparent was a citizen of India.
• They are married to someone who is of Indian origin or a current Indian citizen, provided the spouse is not a citizen of either Bangladesh or Pakistan.

Who are Overseas Citizens of India (OCIs)?

In India, the concept of dual citizenship isn't recognised as per the Constitution. However, considering the aspirations of the Indian diaspora, the government introduced the Overseas Citizen of India (OCI) card.

It's crucial to understand that the OCI status isn't the same as 'dual citizenship.' While it offers several privileges, it doesn't grant political rights

The eligibility revolves around historical and ancestral connections to India. If a foreign national:

• Was eligible to be an Indian citizen on January 26, 1950
• Was an Indian citizen any time after January 26, 1950
• Originated from a region that joined India post-August 15, 1947

Minor children of individuals fitting the above criteria can also apply for an OCI card. However, those who were once citizens of Bangladesh or Pakistan are not eligible.

Difference Between NRI and PIO

The table below highlights the difference between NRI and PIO based on various aspects –

Aspect	NRI (Non-Resident Indian)	PIO (Person of Indian Origin)
Definition	An Indian citizen who resides outside India for a certain period	An individual with Indian origins but might not hold an Indian citizenship Often has Indian ancestry such as parents or grandparents
Citizenship	Still holds Indian citizenship	May or may not hold Indian citizenship — could be a citizen of another country
Eligibility Based on Residency	Determined by the number of days spent outside India (generally based on taxation laws)	Defined by ancestral roots rather than the number of days spent in or out of India
Passport	Holds an Indian passport	Might have a passport from another country but can also have an Indian one if they are a citizen
Duration of Stay in India	Limited by taxation rules — typically 182 days or fewer in a financial year — to maintain NRI status	PIO cardholders can stay up to 15 years from the date of the card's issuance
Access to Restricted Areas	May require permission for certain restricted areas in India	Need permission from the Foreign Regional Registration Office for certain restricted places
Bank Accounts in India	Can open NRE and NRO accounts	Can open NRO accounts, but not NRE accounts
Exclusions based on Nationality	None. All Indian citizens can be NRIs based on their residency.	Citizens of Bangladesh and Pakistan cannot be recognised as PIOs

Investment Options for NRIs and PIOs

Investment avenues in India are wide-ranging and cater to both NRIs and PIO cardholders. Whether you're seeking to grow your funds or simply secure them, India offers various options tailored for its global community. 

Here's a simplified guide on the investment opportunities available to NRIs and PIOs –

Deposits -

For NRIs and PIOs, India offers specialised bank accounts such as the NRE (Non-Resident External), FCNR (Foreign Currency Non-Resident), and NRO (Non-Resident Ordinary) accounts.

• NRE Account: Primarily for maintaining income earned abroad in India. It's in INR, but the money can be freely repatriated.
• FCNR Account: A term deposit account in which one can save money in foreign currency. It protects the investor from exchange rate risks.
• NRO Account: Suitable for managing income earned in India like rent or dividends. Though primarily non-repatriable, there are certain conditions under which funds can be repatriated.

Repatriation -

Repatriation refers to the transfer of funds from an NRO account to a foreign account. While this was limited in the past, current rules permit the transfer of up to USD 1 million annually, after income tax deductions.

Investment on Repatriation Basis -

These are investments from which returns can be transferred back to the investor's foreign account.

• Foreign Direct Investments (FDI): NRIs and PIOs can invest directly in Indian businesses, subject to specific sectors and limits.
• Treasury Bills and Bonds: These are short-term debt instruments issued by the Indian government that can offer reliable returns.
• Domestic Mutual Funds: They can invest in diverse portfolios, offering varying degrees of risk and returns.

Investment on Non-Repatriation Basis -

These investments primarily keep the returns within India.

• Money Market Mutual Funds: Investment in short-term market instruments, suitable for those seeking lesser risks
• Chit Funds: A pooled fund where members contribute periodically and can bid to borrow from the pot
• Postal Savings: Offered by the postal department, they are secure and have been traditionally popular in India.

Immovable Property -

NRIs and PIOs can buy residential or commercial properties in India. However, they're restricted from investing in agricultural land, plantation property, or farmhouses, unless inherited or gifted to them.

Transmission of Inheritance -

If an NRI or PIO inherits property or other assets in India, the process to transfer this inheritance to their legal heirs — either in India or abroad — is straightforward or doesn't require special permissions.

Housing Loans -

Indian banks and financial institutions provide housing loans to NRIs and PIOs, making it easier for them to own property. These loans are similar to those offered to Indian residents but may have specific documentation requirements.

Frequently Asked Questions