created by Rajesh Dhruva

OCI BECOMES COMPULSARY

OCI BECOMES COMPULSARY 
                                                                           

For time immemorial Non Resident Indians being  Indian Citizens & Foreign Citizens of Indian Origin residing abroad did not require any additional documents other than proof of their residence abroad for purchase or sale of Properties or investing in Businesses . As such Indian Citizens & Foreign Citizens of Indian Origin were required to provide copies of their Passports ; Business or Permanent Residency Visas ; Proof of overseas Residence by way of Utility Bill ; Driving License etc.. And since few years with incorporation of Foreign Account Tax Compliance Act (FATCA) & Common Reporting Standards (CRSs) Overseas Tax Identification Number became an additional necessity but otherwise Indian Citizens & Foreign Citizens of Indian Origin continued to be treated at par.

But there is a sea change since 7th November 2017 when provisions of Foreign Exchange Management Act, 1999 (FEMA) have made it necessary  for Foreign Citizen of Indian Origin to hold an Overseas Citizen of India (OCI) Card  to actively participate in Business by way of Partnership Firm ; Proprietorship Firm or Limited Liability Partnership (LLP) & also for Passive Investments under Portfolio Investment Schemes (PIS) on repatriation basis.

So now a Foreign Citizen of Indian Origin is required to be an OCI Card Holder if he wishes to undertake active business as Proprietor or Partner in Partnership Firm ; Proprietorship Firm or LLP.

And a far reaching change has been introduced in March 2018 when these requirements for OCI Card are extended to purchase , sale or transfer of immovable property in India by Foreign Citizens of Indian Origin residing abroad . As such if  a Foreign Citizen of Indian Origin residing abroad wishes to purchase a property or sell or transfer by way of gift or exchange a pre owned existing immovable property he will have to ensure to apply for and  hold an OCI Card or otherwise he will be contravening the law

These requirements for holding OCI Card by a Foreign Citizen PIO for joining a Partnership Firm ; Proprietorship Firm ; LLP etc. have been introduced vide Notification No. FEMA 20(R)/ 017-RB November 07, 2017 of Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2017, whereas OCI cardholder requirements for transfer of property by Foreign Citizen PIO were introduced vide Notification No. FEMA  21(R) / 2018-B of 26th March, 2018 of Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations, 2018.

Salient features of these Rules are briefly discussed herein 
 

I.  ACTIVE BUSINESSES & PIS :

1.Foreign Citizens of Indian Origin will be required to be an OCI Card Holder for actively participating in Businesses as :

    01Partner in Partnership Firm or LLP and a  Proprietorship Firm

2.OC.04  Is spouse of Indian Citizen or OCI Card Holder.I Card will also be required for PIS in Listed Securities of Indian Companies on non repatriation basis
3.It may be noted that OCI Card is not required for :

   01. Direct Investments in Securities of Indian Private Limited Companies
   02  Direct Investments in Shares & Debentures of or Non-listed Public Limited Company.
   03  PIS of Indian Stocks on repatriation basis.

4.OCI Card will also not be required for :
.  01 Opening & maintaining Non Resident External (NRE) , Non Resident Ordinary (NRO) Rupee Bank accounts..
  .02 Opening & maintaining of US$ , GBP , EURO , CAD , AUD & JYEN Foreign Currency Non Resident (FCNR)                    Deposits
  03  Investments in Indian Government Securities
 .04  Investments in Indian Mutual Funds
 

5. It is important to note that if Foreign Citizens of Indian Origin is already conducting business in Proprietorship Firm , Partnership Firm , LLP or has a PIS on non repatriation basis prior to incorporation of these Regulations in November 2017 such PIO will have to apply for and avail OCI Card for continuing Business as a Proprietor or Partner in Partnership Firm or LLP or continuing PIS on non repatriation basis. The Regulations are silent about the requirements for existing and continuing investments and about time limit for obtaining OCI Card in case of Foreign Citizen PIOs who already are continuing PIS investments or are conducting business in Proprietorships , Partnerships or LLPs . However continuing such investments without OCI Card will amount to violation of provisions of FEMA and same may attract penal provisions which makes it appropriate and prudent to apply and avail OCI Card at the earliest.

7. It may be noted that investments in Proprietorship Firm ; Partnership Firm or LLP are permissible on non repatriation basis and as such does not require compliance under FEMA which shifts the onus of compliance vested with NRI's Chartered Accountants & other Professional Advisors. 

II. IMMOVABLE PROPERTIES :

1.Since 26th March 2018 OCI Card has become necessary. PIO Card is required to be an OCI Card Holder for transfer      of immovable property too.

  02  As such every individual who purchase , sale or transfer any immovable property after 26th March 2018 PIO Card            will be required OCI. Although this Law is prospective as the same covers sale, gift & transfer by any other mode.

2. PIOs who are owning property prior to 26th March 2018 will need to avail and apply for OCI for sale , gift or transfer or any other mode of existing property on or after 8th March 2018

3. It is possible that Property Registrar's Office or Bankers crediting balance in NRO account and thereafter permitting repatriation under US$ 1 mn scheme may not be aware about these amendments which will add to the responsibility of NRIs' Chartered Accountants & other Professional Advisors to ensure that PIOs have OCI Card while acquiring new property for selling and transferring existing property.

III. SALIENT FEATURES OF OCI CARD :

1. ELIGIBILITY  If Foreign Citizen is eligible for OCI if he was :

01 Indian Citizen on 26th January 1950 or any time thereafter.
02 Born in India after 26th January 1950 and before 1st July 1987 ; was Born after 1st July 1987 but before 3rd December 2004 provided either of his parents as a Citizen of India after at the time of birth or is born in India after 3rd December 2004 and both his parents are Indian Citizen or one of the parents is a Legal Indian Citizen and other is a Legal Migrant.

03  Whose one of the parents or grandparents or great grandparents have been Citizen of India or .
04  Is spouse of Indian Citizen or OCI Card Holder.

2. APPLICATION  Application is to be made together with supporting documents at ttps://ociservices.gov.in  

2.Supporting documents

01 Proof of Citizenship.
02 Copy of Passport ; Certificate of Citizenship ; copy of Birth Certificate ; Address Proof by way of recent Utility Bills              and 
03  Proof of parents , grandparents or great grandparents Indian Citizen or OCI Card Holder and Marriage Certificate if           available in case of spouse
04 Originals are to be presented at Indian Embassy in the country of Residence or Regional Passport Office or                       Foreigners Regional Registration Officer (FRRO) in India with payment of feed of Rs. 15,000/- by Banker's Cheque

3.BENEFITS :

.01  Lifelong visas with facility of multiple entries.
.02  No requirements of Registration with FRRO or Police Authorities.
.03  No approvals require for conduct of any business or profession or any permissible investment.

OCI Card holder under the age of 20 and above the age of 50 are required to have a fresh or a new OCI Card every time they seek reissuance of their passport. NRIs who are between the age 20 and 50 are not required to have a fresh OCI if they get the passport renewed.

Well its not a big issue to worry about but for PIOs to be on the right side of the Law  by availing OCI Card at the earliest is the need of the moment