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Update 10 December 2012, this vexing rule is no more, see here for details.
Now some fine print.
2 month re-entry restrictions:
Following the 2008 Mumbai terrorist attacks, India imposed a strict regime preventing frequent travel in and out of India. The Rapid Traveler was in Sri Lanka at the time and the initial implementation wrecked havoc with many travel itineraries since India is the transit hub for South Asia. The situation seems to have stabilized but anything left to the discretion of an immigration officer, in any country, is a risk.
India’s visa processing outsourcer, Travisa, summarizes the policy:
Question: When do I need a re-entry permit?
Answer: The Permit to Re-enter within two months only applies to current Tourist Visa holders who need a permit which will allow the applicant to re-enter India within 2 months after last leaving India. This permit is granted only if the need is urgent, and not for Business Activities/Employment or pursuing studies/research, etc. If the visa holder is traveling to multiple countries on the same itinerary, no permit is needed as long as trip follows the itinerary exactly. The visa holder must carry a copy of the itinerary to show the Immigration Officer. If you would like to apply for a Permit to Re-enter within two months, please proceed to the Get An India Visa page. Or, you can visit the Permit to Re-enter requirements page for more detail.
Question: I am traveling back and forth from India within the two-month period but during one single trip. Do I need a Permit to Re-enter?
Answer: If the visa holder is traveling to multiple countries on the same itinerary, no permit is needed as long as trip follows the itinerary exactly. The visa holder must carry a copy of the itinerary to show the Immigration Officer. However, we cannot guarantee that you will be granted re-entry by the immigration official.
The Rapid Traveler has not tried a multi-country itinerary since this regime was put in place, but prudence suggests that if at all possible, get the permit in advance rather than rely on the discretion of an immigration officer. $41 for the permit is a good insurance policy. If unable to get the permit in advance, work with a travel agent or online service like tripit to get the itinerary on one document, instead of multiple papers showing separate reservations for flights and hotels.
Part 3 will cover Protected Area Permission/Restricted Area Permission.