PIS Account for NRI

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:

1. 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

2. 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: 

1. 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. 

2. 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.

3. 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. 

4. 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.

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