Know Who Is A Person Of Indian Origin (PIO) - Financial Rights, Restrictions, and Prohibitions

In this article, we find who is Person of Indian Origin (PIO), and different perspective of what a PIO in India when a PIO start doing any financial dealings in terms of rights, special considerations, restrictions and opportunities. First of all we look into the definition of Person of Indian Origin or PIO.

1. Who is a Person of Indian Origin or PIO?

  1. A person who is not a citizen of India is deemed to be of Indian origin if that person is not a citizen of Pakistan or Bangladesh and if the person at any time held an Indian passport or either of person's parents or any of grand-parents was a citizen of India by virtue of the Constitution of India or Citizenship Act, 1955.
  2. A spouse (not being a citizen of Pakistan or Bangladesh) of an Indian citizen or of a Person of Indian Origin is also treated as a Person of Indian Origin for the purpose of NRI deposits if the accounts are held jointly with the NRI / PIO spouse.
  3. A person who or whose any of ancestors was an Indian national and who is presently holding another country’s citizenship / nationality ie., person is holding foreign passport.
  4. Who belonged to a territory that became part of India after the 15th day of August, 1947.

2. Restrictions for a PIO if Visits India

  1. A PIO must have a valid visa for visiting any place in India.
  2. A PIO has to register with the local police authorities if a PIO stays in India for more than 180 days.
  3. A PIO has restrictions on activities undertakings in India as per the terms of Visa obtained.
  4. A PIO can acquire citizenship in India only if that person has to be ordinarily resident in India for a period of 7 years. If a PIO has fulfilled this condition, PIO can apply through a registration process.

3. Permitted Financial Undertakings in India by A PIO

  1. Opening  Bank Account By A PIO

    1. A PIO is permitted to open bank accounts in India out of funds remitted from abroad, foreign exchange brought in from abroad or out of funds legitimately due to them in India, with Authorised Dealer (AD). Such accounts can be opened with banks specially authorised by the Reserve Bank of India (RBI) in this behalf. Following bank account types, ie., (1) Rupee account - NRE account, (2) Rupee account - NRO Account, (3) Foreign Currency Non Resident (Banks) Accounts (FCNR (B) accounts).
      1. Rupee Account - Non-Resident (External) Rupee Accounts (NRE Accounts): A PIO is eligible to open NRE Accounts in India. These are rupee denominated accounts. Accounts can be in the form of savings, current, recurring or fixed deposit accounts. Accounts can be opened by remittance of funds in free foreign exchange. Foreign exchange brought in legally, repatriable incomes of the account holder, etc. can be credited to the account. Joint operation with other PIO is permitted. Power of attorney can be granted to residents for operation of accounts for limited purposes. The deposits can be used for all legitimate purposes. The balance in the account is freely repatriable. Interest lying to the credit of NRE accounts is exempt from tax in the hands of the PIO. Funds held in NRE accounts may be freely transferred to Foreign Currency Non Resident (FCNR) accounts of the same account holder. Likewise, funds held in FCNR accounts may be transferred to NRE accounts of the same account holders.
      2. Ordinary Non-Resident Rupee Accounts (NRO Accounts): These are Rupee denominated non-repatriable accounts and can be in the form of savings, current, recurring or fixed deposits. These accounts can be opened jointly with residents in India. When an Indian National / PIO resident in India leaves for taking up employment, etc. outside the country, other than Nepal or Bhutan PIO's bank account in India gets designated as NRO account. The deposits can be used to make all legitimate payments in rupees. Interest income, from NRO accounts is taxable. Interest income, net of taxes is repatriable. Authorised Dealers may allow remittances up to US $ 1 million, per financial year, out of balances held in NRO account for any bonafide purpose. Power of Attorney can be granted to residents for operation of account for limited purposes.
      3. Foreign Currency Non Resident (Banks) Accounts (FCNR (B) Accounts:  A PIO is permitted to open and operate Foreign Currency Non Resident (Banks) Accounts (FCNR (B) Accounts). A PIO is also permitted to open FCNR (B) Accounts in Canadian Dollars and Australian dollars also besides the existing provision of maintaining such accounts in US dollars, Japanese Yen, Sterling Pounds, Euro. The account may be opened only in the form of term deposit for any of the three maturity periods viz; (a) one year and above but less than two years (ii) two years and above but less than three years and (iii) three years only. FCNR(B) accounts can also be utilised for local disbursements including payment for exports from India, repatriation of funds abroad and for making investments in India, as per foreign investment guidelines.
    2. Transferring Fund From NRO Account

      1. A PIO can transfer fund from own NRO account to own NRE account or can remit fund abroad from own NRO account within overall limit of USD 1 Million or equivalent per financial year subject to payment of tax as applicable and on production of an undertaking by the remitter in Form 15 CA and a certificate from the Chartered Accountant in Form 15 CB.
      2. PIO is extended the same facilities for bank account maintenance in India as NRI and are also, for such purposes, called by the generic name as NRI.
    3. Resident Joint Account For A PIO

      1. PIO can open a joint account with a resident close relative (Close relative as defined in Section 6 of the Companies Act, 1956) on former or survivor basis.

4. PIO Restrictions and Terms of Transacting An Immovable Property in India

  1. PIO can acquire immovable property in India other than agricultural land / plantation property or a farm house out of inward remittances as well as from repatriable or non-repatriable funds held in his non-resident account. He may acquire an immovable property by way of gift and inheritance also.
  2. A PIO can repatriate the sale proceeds of immovable property to the extent of Foreign inward remittances or amount drawn from FCNR / NRE account. Excess sale proceeds, if any can be credited to NRO account, which will be eligible for repatriation abroad upto USD 1 million per financial year, subject to payment of eligible tax.
  3. In case of Residential properties, the repatriation of sale proceeds is restricted to not more than two such properties.
  4. If the property was acquired out of Rupee sources / inheritance / Legacy,  PIO may remit an amount up to USD 1 million or equivalent per financial year out of the balances held in the NRO account, subject to tax compliance. However this facility is not available, if such inherited property is agricultural / plantation property or Farm house.

5. Loan Restrictions Prohibition to PIO

Loans cannot be granted by any financial institution to PIO for the following purposes:

  1. Re-lending
  2. Carrying on agricultural/ plantation activities.
  3. Investment in real estate business (Real Estate business does not include development of township, Construction of residential / commercial premises, Roads / Bridges).
  4. Acquisition of commercial property.

6. Granting Bank Loans To PIO

  1. Bank loans can be granted to PIO as well as to third parties in India against NRO deposits without any ceiling subject to for meeting the personal requirements or for carrying on business activities other than for the prohibited purposes mentioned elsewhere. However loans cannot be granted to the account holder or third parties abroad against NRO deposits.
  2. Bank loans can be granted to PIO as well as to third parties in India against NRE / FCNR deposits without any ceiling subject to usual margin requirements.

7. RBI's General Permission To PIO For Financial Investments / Transactions

Reserve Bank of India (RBI) has granted general permission to PIO, for undertaking direct investments in Indian companies, under the Automatic Route, purchase of shares under Portfolio Investment Scheme, investment in companies and proprietorship / partnership concerns on non-repatriation basis and for remittances of current income. PIO do not have to seek specific permission for approved activities under these schemes. The Reserve Bank of India has now further simplified financial transactions by PIO by granting general permissions to:

  1. To resident individuals, partnership / proprietorship concerns to avail of interest bearing rupee loans from PIO out of funds remitted by them from abroad or out of funds held in their bank accounts in India, on non- repatriation basis.
  2. PIO to transfer by way of gift shares held by them in Indian companies and to transfer by way of gift immovable property held by them in India subject to compliance with other applicable rules / regulations including the provisions of Foreign Contribution Regulations Act, 1976 by the charitable trust /organisation concerned.
  3. All domestic public / private sector mutual funds for issue of Units to PIO on both repatriation as well as non-repatriation basis.
  4. PIO to place deposits with Indian firms, on non-repatriation basis and with Indian companies including Non-banking financial companies on non-repatriation basis out of domestic sources.
  5. PIO for sale of shares acquired under direct investment Schemes on stock exchanges in India.
  6. PIO for transfer of shares, by way of sale under private arrangement to another NRI or to a resident.
  7. PIO can invest in Government Securities and Treasury Bills.

Prohibited Investments by A PIO

Following investments by a PIO is prohibited:

  1. Lottery Business including Government / private lottery, online lotteries.
  2. Gambling and betting including casinos.
  3. Chit funds.
  4. Nidhi company.
  5. Trading in Transferable Development Rights (TDR).
  6. Real Estate Business or Construction of Farm Houses.
  7. Manufacturing of Cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes. The prohibition is on manufacturing of the products mentioned and foreign investment in other activities relating to these products including wholesale cash and carry, retail trading etc. will be governed by the sectoral restrictions laid down in Regulation 16 of FEMA 20(R).
  8. Activities / sectors not open to private sector investment viz.:
    1. Atomic energy and
    2. Railway operations
  9. Foreign technology collaboration in any form including licensing for franchise, trademark, brand name, management contract is also prohibited for Lottery Business and Gambling and Betting activities.

Person Of Indian Origin Card Scheme (PIO Card)

As per the Gazette of India (Part-I, Section-I) published on 09.01.2015, all the existing Persons of Indian Origin (PIO) card holder registered as such under new PIO Card scheme 2002, shall be deemed to be Overseas Citizens of India Cardholder. All PIO card holders with valid PIO cards as on 09.01.2015 are advised to apply for conversion of their PIO card to OCI card.

Bureau of Immigration would not accept PIO card as valid document after March 31, 2019. Machine-readable electronic document is mandated by the International Civil Aviation Organization (ICAO) guidelines. If in the meantime, any deadline is notified by the ICAO, thereby making hand written PIO cards invalid, then PIO card holders may have to obtain appropriate visa from Indian Missions, if they have not converted their PIO card to OCI card.

PIO Card Validity Extended

Ministry of Home Affairs has informed that Bureau of Immigration (BoI) will accept all Person of Indian Origin (PIO) cards (including handwritten PIO cards) as valid travel document till September 30, 2020, along with valid foreign passport. All Indian Immigration Check Post (s) will continue to consider PIO cards valid for exit from / entry into India till 30th September, 2020 instead of earlier circulated deadline ie., 31st March, 2020. This extension of timeline is subject to the condition that if in the meantime any deadline is notified by the International Civil Aviation Organisation (ICAO) thereby making handwritten PIO cards invalid, then PIO cardholders may have to obtain appropriate visa from Indian Missions / Posts.

All PIO cardholders are meanwhile advised to convert their PIO cards to OCI cards well in time.

Features of New OCI Card to Be Noted By PIO

  1. OCI card is a smart card,
  2. Possession of an OCI card will facilitate quicker immigration clearance at Immigration Check Posts,
  3. It will help in obtaining various Consular Services from Indian Missions / Posts,
  4. For those who are resident in India, it will facilitate in availing various services in India,
  5. The fee for conversion of PIO card to OCI card is $100,
  6. The fees for issuance of fresh OCI cards will remain as $275.

PIO Card Holders Are Deemed to be OCI Card Holders

The conversion process does not require any extra scrutiny or additional documentation except for the requirement of copies of the foreign passport and the existing PIO card. In other words, PIO card to OCI card conversion does not entail the same procedure as followed in issuance of a fresh OCI card to those who never held a PIO card.