OCI Cardholder Rights Today: What the March 2021 MHA Notification Lets You Do and Where You Are Treated as a Foreigner

An Overseas Citizen of India (OCI) card is a lifelong immigration and multiple-entry visa, not a form of citizenship, and the single document that defines what it lets you do today is the Ministry of Home Affairs Gazette Notification No. S.O. 1050(E) dated 4 March 2021. That notification consolidated and superseded every earlier circular on OCI rights into one list, so the common question an OCI holder abroad asks before a transaction in India - can I buy this flat, open this account, repatriate this money - has a single statutory answer rather than a patchwork of pre-2021 memos.

The 2021 notification draws one clean line: for a defined list of economic and financial matters an OCI cardholder is treated at par with a Non-Resident Indian (NRI), and for everything not on that list and not already governed by the Foreign Exchange Management Act, 1999 (FEMA), the cardholder is treated at par with any other foreign national. Knowing which side of that line a transaction falls on decides both what is permitted and how it is taxed. This guide maps the four questions that matter - the FEMA and treaty position, the tax in India, the interaction with tax abroad, and the repatriation mechanics - for an OCI holder resident in the United States or the United Kingdom.

FEMA / DTAA Position

Under the 4 March 2021 notification, an OCI cardholder enjoys parity with NRIs for the purchase and sale of immovable property other than agricultural land, a farmhouse or a plantation. That single carve-out is the most litigated line in OCI practice: residential and commercial property is open, but agricultural land, plantation property and farmhouses are closed to acquisition by purchase, mirroring the restriction FEMA imposes on NRIs. The cardholder also gets parity with NRIs across economic, financial and educational fields, again excepting the acquisition of agricultural or plantation property.

The governing exchange-control instrument is FEMA, 1999, whose Section 6 sets the default rule that capital-account transactions need Reserve Bank of India (RBI) permission unless they are specifically permitted. Acquisition and transfer of immovable property by an OCI holder is a permitted class, which is why no prior RBI approval is needed to buy a Mumbai apartment, but the same section is why buying agricultural land still requires specific RBI permission that is, in practice, not granted to non-residents. For any matter the 2021 notification does not list and FEMA does not cover, the cardholder is simply a foreign national - OCI cards confer no voting rights, no entitlement to most government employment, and no right to hold constitutional office.

The Double Taxation Avoidance Agreement (DTAA) position sits on top of this. India has retained its right to tax income sourced in India, and the treaty only caps the rate or allocates a credit; it never makes Indian capital gains disappear. For both the India-United States treaty (effective 12 September 1991) and the India-United Kingdom treaty (effective 26 October 1993), long-term capital gains on Indian assets remain taxable in India, with India's domestic long-term rate of 12.5% applying. Treating treaty capital gains as "exempt" is the most common and most expensive error an OCI seller makes. You can model the headline relief on the DTAA benefit calculator and read the term itself in the DTAA glossary entry.

The table below summarises where an OCI cardholder stands after the 2021 notification.

Tax Treatment in India

Because an OCI cardholder transacting from abroad is almost always a non-resident for Indian tax purposes, the Income-tax Act, 1961 taxes only India-sourced income, and the rate turns on the asset and the holding period. On the sale of a house held for more than 24 months, long-term capital gains are taxed at 12.5% without indexation for property acquired on or after 23 July 2024; property acquired before that date carries a grandfathered option of 20% with indexation, whichever is lower. Rental income from an Indian flat is taxed at slab rates after the standard 30% deduction under Section 24, and you can estimate both the gain and the rental liability on the NRI tax calculator and the rental income tax calculator.

The mechanism that bites first is tax deducted at source. Section 195 of the Income-tax Act requires the buyer of property from a non-resident to withhold tax on the entire sale consideration, not merely the gain, and the applicable withholding is the DTAA rate or the rate in the Act, whichever is lower. For a long-term property sale that base rate is 12.5% plus surcharge and 4% health and education cess; because the deduction is on gross consideration, OCI sellers routinely apply to the Assessing Officer for a lower or nil deduction certificate under Section 197 to avoid locking up cash they will later reclaim as a refund. The concept is explained in the TDS glossary entry.

Surcharge is the layer that catches larger transactions, and the 2021 notification does nothing to shield OCI holders from it. On capital gains, the surcharge is capped - the Finance Act limits the surcharge on capital-gains income to 15% even where total income is higher - but on other income the slabs below apply. Note the hard ceiling: under the new tax regime the maximum surcharge is 25%, not the 37% that used to sit at the top of the old regime.

One number OCI holders frequently ask about is the Section 87A rebate: for FY 2025-26 it is Rs 60,000 in the new regime for resident individuals with total income up to Rs 12,00,000 - but it is available only to residents, so a non-resident OCI cardholder cannot claim it at all. The surcharge mechanics themselves are covered in the surcharge glossary entry.

Tax Treatment Abroad

An OCI cardholder resident in the United States or United Kingdom is taxed by the country of residence on worldwide income, which means the Indian gain is taxed twice at source and then relieved through a foreign tax credit. Article 24 of the India-US treaty, effective since 12 September 1991, provides that the foreign tax credit is available in the country of residence, so the tax a US-resident OCI pays in India on a property sale is creditable against the US liability on the same gain, subject to the US foreign-tax-credit limitation and the long-term capital-gains rate that applies federally.

The treaty rates matter because they cap what India may withhold on passive income even though they do not touch capital gains. The table contrasts the two treaties for the income an OCI typically earns from Indian assets; the capital-gains line is shown as taxable, never exempt, because India retains the right to tax at its domestic 12.5% long-term rate.

The dividend line carries a trap worth stating in full: under Article 10 of the India-US treaty the 15% rate applies only where the recipient holds at least 10% of the voting stock of the payer company (a direct, parent-subsidiary holding); in every other portfolio case the treaty rate is 25%. Both treaties also contain a "make available" test for fees for technical services under Article 12, and the India-UK treaty carries a residence tie-breaker in Article 4 for anyone who could be read as resident in both states. To claim any of these capped rates, the OCI holder must furnish a Tax Residency Certificate from the foreign tax authority and file Form 10F in India; without them the payer defaults to the higher domestic rate. You can compare the credit mechanics on the foreign tax credit calculator.

Repatriation Mechanics

Owning the asset is one half of the exercise; moving the money out is the other, and here the OCI holder uses exactly the same three account types as an NRI. A Non-Resident External (NRE) account holds income earned abroad, is fully and freely repatriable, and its interest is exempt from Indian tax; a Non-Resident Ordinary (NRO) account holds India-sourced income such as rent, dividends and sale proceeds, is taxable in India, and is repatriable only up to a ceiling; and a Foreign Currency Non-Resident (FCNR(B)) deposit holds funds in foreign currency and is fully repatriable. The distinctions are set out in the NRE account, NRO account and FCNR deposit glossary entries.

The practical constraint on property sale proceeds is the NRO repatriation ceiling. RBI permits remittance of up to USD 1 million per financial year out of balances in an NRO account, covering sale proceeds of immovable property and other current and capital account funds, provided the applicable taxes have been paid. Because the 2021 notification places OCI holders at par with NRIs for financial matters, this USD 1 million window applies to them identically. Running the sale proceeds through the repatriation route requires two tax forms - Form 15CA, a self-declaration, and Form 15CB, a chartered accountant's certificate - before the authorised dealer bank releases the remittance abroad. The repatriation calculator estimates the net amount after tax and the annual cap.

Two FEMA points complete the picture. First, the USD 1 million limit is a per-financial-year ceiling on the NRO account, not a per-transaction cap, so a large sale may need to be remitted across two financial years. Second, funds originally brought in and invested on a non-repatriation basis do not become freely repatriable simply because the holder has an OCI card; the character of the original investment governs, which is why Schedule 4 of the Non-debt Instruments Rules treats such holdings as domestic. Section 6 of FEMA, 1999 remains the backstop: anything not specifically permitted needs RBI approval, and the Liberalised Remittance Scheme ceiling of USD 250,000 per year is a resident's facility, not a route available to a non-resident OCI holder.

FAQ

Does an OCI card make me a resident of India for tax purposes?

No. An OCI card is a lifelong visa, not citizenship or tax residence. Your Indian tax residency is decided independently under the Income-tax Act, 1961 by counting days of physical presence in India during the financial year. Most OCI holders living abroad are non-residents and are taxed in India only on India-sourced income. The day-count test is explained in the residential status glossary entry.

Can an OCI cardholder buy agricultural land in India?

No. The 4 March 2021 notification gives OCI holders parity with NRIs for immovable property except agricultural land, farmhouses and plantation property, and FEMA, 1999 does not permit non-residents to purchase these by purchase. You may, however, inherit agricultural land, and you may hold agricultural land you owned before becoming a non-resident.

Is my capital gain on an Indian property exempt under the US or UK treaty?

No. Both the India-US treaty (effective 12 September 1991) and the India-UK treaty (effective 26 October 1993) leave India free to tax capital gains on Indian assets, at the domestic long-term rate of 12.5%. The treaty gives you a foreign tax credit in your country of residence under Article 24 of the US treaty; it does not exempt the Indian gain.

How much can I repatriate from the sale of my Indian flat?

RBI allows up to USD 1 million per financial year out of an NRO account, covering immovable-property sale proceeds and other eligible funds, once taxes are paid and Forms 15CA and 15CB are filed. A sale larger than that must be spread across financial years. NRE and FCNR(B) balances have no such cap.

Why did the buyer deduct tax on my entire sale price, not just the gain?

Section 195 of the Income-tax Act requires the buyer to withhold on the full consideration paid to a non-resident, at the DTAA rate or the Act rate, whichever is lower - 12.5% plus surcharge and 4% cess for a long-term sale. To avoid over-withholding, apply to the Assessing Officer under Section 197 for a lower or nil deduction certificate before the sale completes.

Can an OCI holder claim the Section 87A rebate of Rs 60,000?

No. For FY 2025-26 the Section 87A rebate is Rs 60,000 in the new regime for total income up to Rs 12,00,000, but it is available only to resident individuals. A non-resident OCI cardholder cannot claim it, regardless of income level.

What surcharge applies to a large capital gain?

The surcharge on capital-gains income is capped at 15% even where total income is higher. On other income the slabs run from 10% above Rs 50 lakh to 25% above Rs 5 crore under the new regime; the old regime's top rate of 37% does not apply in the new regime, which is capped at 25%.