NRIs who want to invest in the Indian stock markets and repatriate returns without breaching laws should use the NRI portfolio investment scheme (PIS). The PIS route enables NRIs to invest legally and securely in Indian equities using their NRE bank accounts. It provides a regulated and clear route to participate in India’s growing stock market. 

The bank linked to the PIS account automatically reports every trade transaction to the RBI, and it ensures maximum compliance. 

In this blog, we explain what a PIS account of NRI is and how it can be a gateway to wealth growth among NRIs.

What is a PIS Account for an NRI?

PIS account meaning: It is a banking facility controlled by the Reserve Bank of India (RBI) that allows NRIs to buy and sell shares or convertible debentures of Indian stock exchange-listed companies. The account ensures that these transactions do not violate legal standards. This is the process that legally directs investments and repatriation, which introduces a conduit between the NRI's foreign earnings and the Indian capital market.

NRE PIS accounts are used to make repatriable trading investments financed by foreign earnings. They can also repatriate returns and income to their overseas bank account without any restrictions. This arrangement allows NRIs to legally trade in Indian exchanges without concerns about compliance and reporting by the banks.

Why is PIS Relevant for NRIs Investing in Indian Equities?

The NRI investing in Indian equities using their foreign income follows the NRI portfolio investment scheme route of transparency, ease of repatriation, as well as compliance with RBI/FEMA. This path is required in both the purchase and sale of listed stock on Indian stock markets and avoids regulatory breaches and fines.

India’s equity market has attracted growing interest from NRIs, with foreign portfolio investments by overseas Indians rising steadily over recent years. It indicates an increase in trust in the global system in such an organised solution.

A PIS account for NRI is mandatorily needed for 

• Equity delivery (listed shares) using NRE account

• Repatriable investments funded by foreign income

The PIS framework applies only to purchases/sales of listed shares and convertible debentures on stock exchanges. Instruments such as the following fall outside the PIS route:

• F&O

• Mutual funds

• IPO subscriptions

• ETFs

• Bonds

• Sovereign gold bonds

• Off-market transfers

• Intraday trading

NRIs can still invest in these instruments, but they are not processed under the PIS reporting mechanism (Eg- PIS permission is NOT required for IPOs).

Although the PIS account for NRI is available, the non-PIS route is applicable in the following cases:

• Trades through the NRO account

• All derivative trades

Through the PIS route, you can trade in Indian stock exchanges, enjoying repatriation and regulatory protection. Remember, NRIs are restricted from doing intraday trading directly. 

Advantages of PIS-Enabled Account.

There are specific benefits of holding a PIS account for NRI.

• Effective compliance with RBI and income tax regulations.

• Option of repatriating share sale revenues (via NRE PIS).

• The administration of tax deductions at source (TDS) has been simplified.

• Quick access to the fully regulated, rapidly expanding Indian equities market.

This arrangement instills confidence and reduces the risk of uncontrolled investment paths.

How to Open a PIS Account: Step-By-Step for NRIs

NRIs can open a PIS account with a bank of their choice. Some of the common requirements are:

• Have a valid NRI and PAN number.

• Provide evidence of foreign residence.

• Send a copy and photographs of your passport.

• Connection PIS authorisation to specific NRE bank accounts.

Banks strictly check documentation so as to agree with the regulatory standards.

1. Check NRI status based on documents (passport, address proof overseas, PAN card).

2. Open an NRE account with an RBI-approved bank.

3. Seek PIS permission by filling in the bank application forms and submitting documents.

4. Open a demat and trading account with a SEBI-registered broker, and connect it with your PIS bank account.

5. Only after this interconnected system should one start buying and selling shares with their NRE account.

By adhering to these steps, investing can be made legal and smooth.

Common Pitfalls to Avoid 

Some of the mistakes that NRIs should be aware of while trading using a PIS account are:

• Unfinished documentation or a lack of KYC documentation.

• Lack of monitoring compliance or annual reporting requirements.

• Not understanding the taxation requirement in the country of residence for repatriated funds.

• Failure to update overseas address change records.

Rules, Limits, and Conditions Under the PIS for NRIs

Some of the rules that NRIs should know about the PIS account for NRIs are:

• NRIs are allowed to invest in a company up to 5% of the paid-up capital. (The aggregate sum that a company can be invested in by its NRI is 10% of the paid-up capital.)

• The sector restrictions prohibit investment in chit funds, agriculture, and sensitive industries.

• An NRI is allowed to have just one specific PIS bank account.

• All the trading information is reported to the RBI by banks to enhance transparency.

• No intraday or margin trading is allowed

• Banks may impose additional restrictions based on RBI rules

Costs for PIS Accounts

PIS accounts involve the following costs:

• Account-establishment fees, transaction processing charges, and annual maintenance fees are typically small.

• Bank reporting fees apply to all PIS accounts.

• The capital gains taxes on profits and taxation of dividends are considered tax obligations.

• To meet with Indian tax authorities, it is necessary to record the contract notes, demat, and bank statements.

• The losses may also offset the future capital gains, providing the benefits of tax planning.

• Forex conversion spreads while repatriating funds overseas.

PIS vs Non-PIS Route: Which is Right for Your Situation?

A PIS route is required only if you want to repatriate returns to a foreign country. Non-PIS Route for NRIs includes investments via basic NRO accounts that can be done on equity delivery, intraday trading, F&O, mutual funds, gifts, inheritance, and other non-repatriable transactions. Below are some key differences between PIS and non-PIS route of investing:

Conclusion

The NRI Portfolio Investment Scheme (PIS) is an excellent option for NRIs to invest using their foreign income and repatriate returns to their overseas bank account. Through the PIS route, all purchase and sale settlements pass through banks. So, PIS trades take longer and are more expensive to settle than non-PIS trades. Banks apply TDS on capital gains based on short-term or long-term gains, and the rest of the returns can be repatriated. However, currency conversion fees are involved. Generally, NRIs who want to repatriate their returns follow the PIS route, but the non-PIS route is more common due to the overall lower costs. 

Looking for investing in India through PIS or non-PIS route? Check out Rupeeflo to get started quickly and the entire process is completed online. 

FAQs

1. Is it possible to switch the nominated PIS bank in the future?

There should be only one PIS bank at a time. To change it, it is necessary to close the current arrangement and business with a new certified dealer.

2. Is it possible to transfer or give shares acquired under PIS?

No. PIS shares acquired should be traded in the market. Any off-market transfer or gift must be pre-approved by RBI, with a few exceptions.

3. What are the investments that are not included in PIS?

Unlisted shares, chit funds, and agricultural companies are not purchasable through PIS.

4. Is it possible to have more than one PIS account for an NRI?

No. An NRI may have only one active PIS account in all the designated banks.