Ayyavazhi stands in a liminal space between categories, and its identity cannot be captured fully by a single label. From within the tradition, adherents generally understand it as a distinct religious path, grounded in its own revealed scripture, the Akilattirattu Ammanai, and centered on the figure of Ayya Vaikundar as a unique, final manifestation of the divine. This self-understanding is reinforced by its particular cosmology, theology, ritual life, and separate institutions and places of worship, such as the Nizhal Thangals. For many devotees, these features mark Ayyavazhi as more than a variant of an older faith, but as a new dispensation that emerged out of a specific historical and spiritual context.

From the perspective of many external observers, however, Ayyavazhi is often situated within the broader Hindu fold. Scholars, Hindu organizations, and governmental bodies frequently classify it as a sect or denomination of Hinduism, pointing to its continuity with Hindu concepts such as dharma and karma, its references to Hindu deities, and its emergence within the Tamil Hindu cultural milieu. Officially, it is not recognized as a separate religion in state census categories, and practitioners are generally recorded under Hinduism in legal and administrative documents. This institutional framing has significant practical consequences, even as it does not fully reflect the self-perception of many followers.

The tension between these two viewpoints gives Ayyavazhi a distinctive spiritual character. On one hand, it shares language, symbols, and certain philosophical ideas with Hindu traditions; on the other, it articulates a fresh vision of dharma, unity, and divine intervention through Ayya Vaikundar that many see as constituting a new religious horizon. The ongoing efforts of Ayyavazhi organizations to seek recognition as an independent religion reflect a desire for the outer form of classification to match the inner experience of the community. In this sense, Ayyavazhi can be seen as a living example of how religious identities evolve, overlap, and sometimes resist neat categorization, while continuing to draw seekers toward a deeper sense of justice, unity, and sacred purpose.