As a NRI, you can invest in the Indian stock market and bonds through NRE PIS account or NRO no-PIS account. The choice is yours! If you want to invest on a repatriation basis, you must use NRE bank account and obtain RBI PIS permission for investment in Indian equities. Getting PIS approval is mandatory for NRI transactions channeled through NRE bank-linked trading accounts.
PIS or Portfolio Investment Scheme is a mechanism developed by RBI for NRI investment in India. As per section 3 of the Foreign Exchange Management Act (FEMA) 2000, an NRI can purchase and sell shares and convertible debentures of listed Indian companies on the BSE and NSE by channeling their investment through the NRI bank account.
The PIS scheme allows non-residents and PIOs (Persons of Indian Origin) to transact in the Indian equity market.
PIS Account – Key Takeaways
Invest in stocks and bonds of companies listed on the recognized stock exchanges (NSE and BSE) using NRE (repatriable) or NRO (non-repatriable) mode.
It only applies on transactions in secondary market or equity investment.
All NRI transactions through a PIS account (NRE or NRO) is reported to RBI.
Now the question here- is seeking PIS permission mandatory for NRIs?
Yes, PIS account is mandatory for NRI investment on a repatriable mode. NRI who wants to place and execute all transactions through NRE-linked trading account, it is necessary to obtain PIS permission from RBI-authorized banks.
As a NRI, if you want to utilize your overseas earnings or income earned abroad to invest in the Indian market, you must open an NRE bank account in India.
However, PIS is not essential for NRIs who intend to invest on a non-repatriable basis by opening an NRO account in India. As they can still invest in the Indian stock market using NRO no-PIS account. Also invest in primary market or IPOs and mutual funds.
Know more on NRI mutual fund investment
NRE PIS Account Key Features
NRI, PIO, or OCI card holder is eligible to open NRE PIS account in India.
NRE PIS account enables Non-Resident Indians to invest in equity shares, debentures, bonds, ETFs, and mutual funds.
NRI can use foreign income in India using the NRE PIS Account.
An NRI can have only one PIS account at a time, a new account can only be opened by closing the existing NRE PIS account.
All investment transactions processed through the NRE PIS account is reported to RBI.
NRI has to transfer funds to their NRE PIS account to invest in Indian stocks.
All domestic banks in India including HDFC, ICICI, Axis, SBI, IDFC First bank avails NRIs to open NRE PIS account.
A non-resident Indian can give Power of Attorney (PoA) to a resident to authorize them to operate the PIS account.
NRI PIS Vs Non-PIS Account Differences
An NRI based on their needs can open either a NRE PIS account or NRO no-PIS account. Here are the differences between NRI PIS and NRI non-PIS accounts:
Who should open PIS account?
An NRE PIS account should be open, if you want to:
Use income earned overseas to invest in the Indian stock market.
Money lying in an NRE bank account is fully repatriable or NRI account holder does not require RBI permission to transfer capital to their foreign account.
Interest earned on the NRE bank account is tax-free.
A 3-in-1 NRE PIS account offers seamless investment without the need to transfer funds to your trading account.
Flexibility to invest in equity and debt asset class.
All the interest and dividends are directly credited to the NRE bank account.
Fund transfer from NRE to NRO bank savings account is allowed.
How to open NRE PIS Account?
In India, RBI has authorized banks to allow non-residents to open NRE PIS account. Most of the domestic banks including private and public banks like SBI, HDFC, ICICI, Axis, etc. offers NRE PIS account opening services to NRI clients.
To open a PIS account, an NRI first has to open an NRE savings account by providing the required documents.
Once the NRE account is opened, NRI can request the PIS permission by submitting the PIS application form. The respective bank will apply for a PIS certificate from RBI on behalf of the NRI customer.
Once PIS approval is granted, the PIS account is linked with the NRE bank account, called the NRE PIS account.
All the transactions done through NRE PIS-linked account is immediately reported to RBI to ensure safety.
All NRI investments in India are taxable with the only exception that interest credited to your NRE or FCNR account is tax-free while NRO account interest is taxable.
If an NRI generates income from investment in shares, it will be taxed in India, and tax will be deducted at source.
As NRI PIS account is managed by banks they know the credit proceeds from investment in shares and other securities and deduct tax accordingly. The rate of tax is different depending upon the investment holding period.
For instance, if you sell shares within 12 months, profits or capital gain (short-term) will be taxed at 15% while sale proceeds after 12 months will attract 10% long-term capital gain tax. The tax rate will be imposed on the amount of capital gains or profits made by NRI.
NRE PIS Account Restrictions
NRI cannot invest in the following segment using PIS activated NRI account:
Cannot invest in companies engaged in chit funds, agricultural or plantation business, real estate relevant to agriculture or farmlands, etc.
NRIs cannot trade in equity derivatives on a repatriable basis.
An Indian whose residency status changed to NRI can only convert his resident savings account to an NRO account. know more
NRI cannot hold investments of more than 5% of the company's paid-up capital.
All NRI investments in an Indian company cannot exceed 10% of its total paid-up capital.
Frequently Asked Questions
Can NRI have a NRE no-PIS account?−
No, NRI cannot have NRE no-PIS account as it does not permit non-residents to transact in the secondary market or purchase and sell shares of Indian companies.
However, no-PIS NRE account allow NRIs to invest in the primary market means IPOs on a repatriable basis.
Is PIS mandatory for NRE account?+
Yes, PIS permission from RBI is mandatory for all NRIs who want to invest in Indian stocks using NRE bank account.
Is NRE PIS account tax-free?+
No, only the amount of interest credited to an NRE bank account is tax-free.
Otherwise, all profits earned on multiple investment avenues like equity shares, mutual funds, etc. are taxable in India. Profits will be taxed as short-term or long-term capital gain depending upon the investment holding period. Tax will be deducted at source on NRI investment in India.
What is the difference between NRE PIS and NRE Non-PIS account+
NRE account in a bank allows NRIs to invest in India on a repatriation basis. It is mandatory for NRIs to get PIS account to invest in Indian equities through an NRE account.
If an NRI gets RBI PIS permission it will be known as an NRE PIS account otherwise called an NRE non-PIS account.
Check out the differences between NRE PIS and NRE non-PIS accounts;
Can an NRI link both an NRE or NRO bank account to the trading account?+
No, NRI can open and operate NRE or NRO or both of these accounts in India. However, they can link any one of them either NRE or NRO to their trading account to invest in Indian investment instruments available to NRIs.
NRI investment held through the NRE mapped trading account is freely and fully repatriable.
NRI investment in India through an NRO account is non-repatriable as the maximum repatriable amount is USD 1 million subject to approval from RBI.
What is the NRE Account?+
The NRE Bank Account is Non Resident External Account. Since it is an external account, any money lying in NRE account can remitted outside the country which means the money is repatriable. The money can transfer from NRE to NRO Account. It can be a saving or current account. With this account, NRI has to go through the PIS route to trade in Indian Stock Market.
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