There is nothing to be confused about in this; you must submit both your original and a copy of your PIO card for an OCI application. When you submit your application, you will need to provide the original PIO card along with the other supporting documents for verification.
Yes, you will need to submit both the original PIO card and a copy when applying for an OCI application in lieu of a PIO card. Your original PIO card will be surrendered to the Indian Mission Post or FRRO when your OCI card is issued.
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To the best of my knowledge, you do not need to send your original PIO card when applying for an OCI card. You only need to submit a copy of your PIO card along with your application form.