PIS Account for NRI

Non-Resident Indians can operate in the recognized stock exchanges and trade in shares and debentures of Indian companies. All you need to do is open a PIS account for NRI and reap the harvest in the secondary market. The NRI must route all the stock market investments through this account to comply with the governing regulations.

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Disclaimer: #The investment risk in the portfolio is borne by the policyholder. Life insurance is available in this product. The maturity amount of Rs 1 Cr. is for a 30 year old healthy individual investing Rs 10,000/- per month for 30 years, with assumed rates of returns @ 8% p.a. that is not guaranteed and is not the upper or lower limits as the value of your policy depends on a number of factors including future investment performance. In Unit Linked Insurance Plans, the investment risk in the investment portfolio is borne by the policyholder and the returns are not guaranteed. Maturity Value: ₹1,05,02,174 @ CAGR 8%; ₹50,45,591 @ CAGR 4%. *Tax benefits and savings are subject to changes in tax laws. All plans listed here are of insurance companies’ funds.

What is Portfolio Investment Scheme (PIS)?

The Reserve Bank of India (RBI) has devised the PIS to facilitate NRI investments in stocks and bonds. Schedule 3 of the Foreign Exchange Maintenance Act, 2000 governs the scheme to monitor all stock market investments, whether credit or debit. To invest in the stock market, you need to set up a PIS-enabled NRE or NRO account in any designated bank. The investment can be made on repatriation or non-repatriation basis.

Why Do NRIs Need a PIS Account?

NRIs who want to earn good returns from investments in the Indian stock market has to hold a PIS account offered by the RBI mandatorily. The only catch for buying and selling Indian company stocks and convertible debentures is that you must operate through a registered broker in the recognized stock exchange. You are authorized to trade freely, barring intra-day transactions. You get the following benefits with a PIS account:

Invest in the Indian stock market
Freely buy, sell, and repatriate
Seamless transactions
User-friendly operations

What are the Eligibility Criteria to Open a PIS Account?

The answer to the query “Is PIS account mandatory for NRI?” is “Yes,” you need to be aware of the eligibility conditions. Non-Resident Indian (NRI) and Person of Indian Origin (PIO) are eligible to avail of the scheme according to the RBI guidelines. What is otherwise essential is to know the limitations. Accordingly, NRIs cannot open a PIS account, if:

A resident is traveling abroad for medical treatment
Residents traveling abroad on short trips
Bangladesh and Pakistan residents without prior RBI permission
Nepal and Bhutan residents
Mariners employed by Indian shipping companies

How Does the PIS Account for NRI Work?

You can freely invest in the Indian stock market either on repatriation or non-repatriation basis. However, you need PIS-enabled NRE or an NRO account to participate in share trading. The funds in the NRE account are eligible for repatriation in total, while the funds in the NRO account are repatriated after paying taxes.

You must apply for designating the account under PIS after opening an NRE or NRO account through a specific application form. All the transactions through the designated account are reported to the RBI once approved. Then, you can start trading with the approved PIS account linked to the NRI Demat and NRI Trading account.

What Are the Documents Required for a PIS account for NRI?

You need to comply with the prescribed documentation to avail of the PIS account for the NRI facility. Having learned about the application procedure, you must be ready with documents specific to your NRI status. Accordingly, the indicative documents list is described below:

For the NRI:
- Valid Passport Copy
- NRI Status proof
- Proof of Address (POA) – both Indian and Overseas
- PAN Card
- Recent colored photographs
- FATCA
- C-KYC
For the PIO ( in addition to the above)
- PIO Status Card
- PIO Declaration duly filled and signed

What Are the Charges for Opening a PIS account for NRI?

Every service in the banking sector invites bank-specific fees charges. Some of the mandatory but indicative fees you pay for availing a PIS account for NRI are listed below for awareness. You must check with your bank for the specifications.

PIS Issuance Charges: It is a one-time fee that you have to pay when you apply for the facility.
PIS Account Maintenance Charge: The fee is levied by banks in defined periods specified for maintaining your account.
PIS Reporting Charge: You are required to pay the charge per trade date separately for purchase and sale regardless of the transacted value or quantity. Speak with your bank for fees charged to specific customer classes.

What Are the Benefits Provided by an NRI PIS Account?

The benefits that are provided to PIS account holders are as follows:

Ease of Transactions:

Being an NRI, it is not always feasible for you to indulge in physical transactions. Your NRI PIS account takes care to ensure that you enjoy a seamless experience within the ambit of the rules and regulations.
Low-Cost Transactions:

All your stock investment transactions are compulsorily routed through the PIS account. Thus, the cost of transactions is kept low as an attraction.
Seamless RBI Compliance:

Your status and use of the PIS account for NRI for your stock market investments are monitored for every transaction. Therefore, you need not bother about RBI reporting norms and other statutory regulations as the account facilitates timely compliance on your behalf.
Value-Added Service:

A specific feature suiting your NRI status is the Enhanced Set-off facility inbuilt in the PIS account for NRI. So what do you stand to get? Save on your Capital Gains Tax when you nullify the PIS transaction’s current losses against future profits. Let us check how:
- Loss set-off is permitted only on future profits and not earlier profits.
- Carryover the losses to the final day of the financial year or till it is set off.
- You cannot carry forward your profits, and the Capital Gains Tax is calculated on the net profit.
- You get the facility at the portfolio level during the financial year.

The Final Words

The Indian capital market offers ample opportunities to explore investment options for NRIs. As an NRI, you must route your investments through the RBI-designed PIS account. The scheme envisages multiple benefits to make your investment experience seamless. Is PIS account mandatory for NRI and its significance are amply explained, and there are no two opinions about it.

FAQ's

Q. What is the investment limit for NRI in the secondary stock market?

Ans. The maximum limit for purchase is five percent of the paid-up capital of a company and each series of debentures on a repatriation basis. The NRI holding is limited to a maximum of ten percent or higher if permitted in a particular company. The limit does not apply to shares purchased from the primary market.
Q. Can the NRI assign multiple designated banks for PIS services?

Ans. No, the NRI can assign only one designated bank for investment transactions through NRE PIS and cannot maintain multiple accounts with authorized dealers under the scheme.
Q. Is PIS permission necessary for the NRI to subscribe for shares in the primary market?

Ans. No, you do not need any permission to invest in the primary market on a repatriation and non-repatriation basis if the application money is paid through the existing NRE or NRO accounts or inward remittance through the normal banking channels.
Q. As an NRI, can you transfer PIS purchased shares under a private arrangement to others?

Ans. No, you cannot transfer or gift PIS purchased shares in the stock exchange under any private arrangement. It is compulsory to sell in a stock exchange except for gifts to relatives defined in Section 6 of the Companies Act, 1956.
Q. Is an NRI eligible for rights and bonus shares?

Ans. Yes, FEMA rules permit-issuing rights and bonus shares to existing NRI shareholders in Indian companies within the prescribed sector caps.

†Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. The sorting is based on past 10 years’ fund performance (Fund Data Source: Value Research). For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in

Past 10 Years' annualised returns as on 01-12-2024

^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.

*All savings are provided by the insurer as per the IRDAI approved insurance plan.

Tax benefit is subject to changes in tax laws. Standard T&C Apply
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^^The information relating to mutual funds presented in this article is for educational purpose only and is not meant for sale. Investment is subject to market risks and the risk is borne by the investor. Please consult your financial advisor before planning your investments.

#The investment risk in the portfolio is borne by the policyholder. Life insurance is available in this product. The maturity amount of Rs 1 Cr. is for a 30 year old healthy individual investing Rs 10,000/- per month for 30 years, with assumed rates of returns @ 8% p.a. that is not guaranteed and is not the upper or lower limits as the value of your policy depends on a number of factors including future investment performance. In Unit Linked Insurance Plans, the investment risk in the investment portfolio is borne by the policyholder and the returns are not guaranteed. Maturity Value: ₹1,05,02,174 @ CARG 8%; ₹50,45,591 @ CAGR 4%

¶Long-term capital gains (LTCG) tax (12.5%) is exempted on annual premiums up to 2.5 lacs.

**Returns are based on past 10 years’ fund performance data (Fund Data Source: Value Research).