The racial classification of Indian Americans has varied over the years and across institutions. Originally, neither the courts nor the census bureau classified Indian Americans as a race because there were only negligible numbers of Indian immigrants in the United States. Various court judgements instead deemed Indians to be "White" or "not White" for the purposes of law. In 1970, in the most recent assignment, the U.S. Census Bureau designated Asian Indians as White. Since 1980, while keeping the validity of its earlier designation (White), the U.S. Census Bureau further allowed Indian Americans to self-report their ethnicity, owing to the immense diversity of the Indian subcontinent, which is home to more than 2000 different ethnic groups and all the racial groups known to mankind. Only the continent of Africa exceeds the linguistic, genetic and cultural diversity of the nation of India. The decision to let Indian Americans self-identify was made both in light of the aforementioned diversity in India, which has all the different racial groups represented in its diverse population, in addition to accommodate the fact that in recent years, increasingly diverse racial and ethnic groups of Indians and South Asians have immigrated to the United States, including from the North-West of the Indian subcontinent, where Caucasian ethnic groups are found.
The earliest Indian immigrants into the United States were called "Hindoos" even though the majority of them were Sikhs. Court clerks classified these early immigrants from the Punjab region as being "white", "brown" or "black" based on their skin color for the purpose of marriage licenses. In addition to being racialized by their color, they were also racialized as being "foreigners". The perception of Indian Americans as foreigners, on the other hand, often helped provide for better treatment, especially in states where de jure segregation was in place. Regardless of their skin color, as "foreign internationals," Indians most often used 'White-Only' facilities, a privilege which they would not have been granted otherwise. As opposed to being seen as "negro," or "brown," they were seen as outside of the traditional American racial spectrum, and consequently freed from some of the encumbrances that system entailed.
Throughout much of the 20th century, U.S. courts classified Indians as both "White" and "non-White". Each ruling was for individuals from different ethnic and racial groups of the subcontinent, reflecting the variability in the resulting decisions. In 1923, the Supreme Court decided in United States v. Bhagat Singh Thind that while Indians were Caucasians and that anthropologists considered them to be of the same race as "White" Americans, people of Indian descent were not "White" men, and thus not eligible to citizenship. The court conceded that, while Thind was a high caste Hindu born in the northern Punjab region and classified by certain scientific authorities as of the Aryan race, he was not "White" since the word Aryan "has to do with linguistic and not necessarily with physical characteristics" and since "the average man knows perfectly well that there are unmistakable and profound differences" between Indians and white Americans. The court also clarified that the decision did not reflect or imply anything related to racial superiority or inferiority, but merely an observable difference. At the time, this decision retroactively stripped Indians of citizenship and land rights. The ruling also placated the Asiatic Exclusion League demands, spurned by growing outrage at the Turban Tide / Hindoo Invasion (sic) alongside the pre-existing outrage at the Yellow Peril. As they became classified as non-whites, Indian Americans were banned by anti-miscegenation laws from marrying white Americans in the states of Arizona, Virginia, South Carolina and Georgia.
In 1935, Thind relied on his status as a veteran of the United States military during World War I to petition for naturalization through the State of New York under the Nye-Lea Act, which made World War I veterans eligible for naturalization regardless of race. The government objected his latest petition, but Thind was finally granted American citizenship; Yet the Government attempted to revoke it after nearly two decades from his first petition for naturalization.
In 1946, Congress, beginning to recognize that India would soon be independent, passed a new law that allowed Indians to become citizens and also established an immigration quota for the same.
The U.S. Census Bureau has changed over the years its own classification of Indians. In the 1930 and 1940 censuses, "Hindu" was listed as a racial category. In 1970, the U.S Census Bureau designated Indian Americans as "White". During the 1970s, Indian Americans debated if they should "give up the emotional and psychological advantages of being considered 'Caucasian'" to try to "seek or accept minority status". Indian American groups, through their own petitioning, successfully changed their racial classification from White to Asian in the 1970s to have themselves included in state and federal Asian racial categories to benefit from affirmative action. Specifically, Indian Americans had their official race changed from White to Asian in 1977 "through Statistical Directive 15 of the Office of Management and Budget", causing Indian Americans to be listed as Asian in the 1980 US Census. Without the action of these Indian American groups, the government would have continued to classify Indian Americans as being White. Since 1980, owing to the diverse nature of South Asians, Indians and other South Asians have been classified according to self-reporting, and have the liberty to identify with the racial and ethnic group that they belong to, with an increasing number identifying as "White", driven by increasing immigration from the North-West of the Indian subcontinent.
Since 1980, owing to the diverse nature of South Asians, Indians and other South Asians have been classified according to self-reporting. In the 1990 US Census, 65% of second generation South Asian Americans identified themselves using a South Asian term, 25% identified themselves as White and 5% identified themselves as Black. In recent years, an increasing number of Indians are identified as "White" due to increasing immigration from the North-West of the Indian subcontinent, which is home to Caucasian ethnic groups within the country. Nikki Haley, the Indian American governor of South Carolina, whose parents are from Punjab in North-West India, identified as White on her voter registration card in 2001.
Both South Asian Americans and other types of Asian Americans mutually feel that there exists "profound racial difference" between themselves and the other group. Furthermore, "Working-class or state school-educated second generation Indian Americans do not see a natural alliance or unity with other Asian American groups."
The 1990 U.S. Census classified write-in responses of "Aryan" as white even though write-in responses of "Indo-Aryan" were counted as Asian, and the 1990 US Census classified write-in responses of "Parsi" under Iranian American.
Some Indian Americans who were unfamiliar with the ethnonymic conventions used in the United States, mistakenly indicated that they were "American Indian" as their race in the 1990 US Census, because they were unaware that this term is used in the United States to refer to Native Americans.
The Asian American Institute proposed that the 2000 US Census make a new Middle Easterner racial category and the Punjabi from Pakistan wanted Pakistani Americans to be included in it.