Several Indian-born citizens are said to be returning to India. Some of them may still possess Indian passports, while others will have obtained US citizenship through the naturalization process.
India does not have dual citizenship. Therefore, to get Indian citizenship, the returning Indian-origin citizens need to give up American citizenship and then apply.
The question that arises is, will those who renounce US citizenship be able to get back Indian citizenship easily?
“No, assuming someone has renounced foreign citizenship, Indian citizenship is not automatically restored,” says Nishant Kohli Founder, NRI Nivesh.
Citizenship Act
“According to the Citizenship Act of 1955, your Indian citizenship ceased when you acquired another nationality, and you must have surrendered your Indian passport. If you want to become a citizen again, you have to apply to the Ministry of Home Affairs of India and satisfy conditions such as, having a total of 11 years’ residence in India in the last 14 years before your application, along with maintaining at least 12 months’ residence immediately before you submit your application” adds Kohli.
The persons of Indian origin can register themselves under ‘The Overseas Citizenship of India (OCI) Scheme’, making them eligible to hold an OCI card. However, OCI is not a ‘dual citizenship’ and does not grant political rights to registered Overseas Citizens of India, as per Article 16 of the Constitution.
Residency Status
For NRIs, it is equally important to update their residency status after arriving in India. “Residency status has very real implications in terms of tax for returning NRIs, and neglecting the same can lead to significant legal and financial consequences,” says Kohli.
“Post the return, NRIs need to change status in bank accounts ( from NRO/NRE to savings account ), Demat Holdings, update KYC across mutual funds, insurance policies and also returning NRIs need to update the Income tax portal”, informs Kohli.
The taxation rules for resident Indians and non-resident Indians are different. To comply with the Indian tax laws is of utmost importance for the NRIs who are turning permanently to India.
“If NRIs return to India and don’t update this, then that’s a violation of FEMA rules, their investments can get flagged for non-compliance or income earned in India may be wrongly taxed or exempted, which may prove a big problem later and will invite notices and penalties from Income tax. In all complexity and seriousness, always notify banks, financial institutions, and the IT Department once you qualify as a Resident under FEMA or Income Tax norms,” adds Kohli.